In this assignment, we will look at various merchant transactions from the buyer’s and seller’s perspective.
Part 2
In this assignment, we will learn that there are two methods in preparing an income statement: the single-step and multi-step. Both use the same accounts and render the same results
Follow the instructions found in the template
Buy and Seller Entries
Franklin Retailing (buyer) and Sandord Wholesalers (seller) enter into the following transactions.
15-Feb
Franklin accepts delivery of $36,000 of merchandise it purchases for resale from Sanford: invoice
dated October 15, terms 3/10, n/90, FOB shipping point. The goods cost Sanford $24,120. Franklin
pays $460 cash to Speedy Shipping for delivery charges on the merchandise.
19-Feb
Franklin returns $1,200 of the $36,000 of goods to Sanford, who receives them the same day and
restores them to its inventory. The returned goods had cost Sanford $804.
25-Feb Franklin pays Sanford for the amount owed. Sanford receives the cash immediately.
(Both Franklin and Sanford use a perpetual inventory system and the gross method.)
Instructions
1. Prepare journal entries that Franklin Retailing (buyer) records for these three transactions.
No
Date
General Journal
Debit
Credit
1
2
3
4
2. Prepare journal entries that Sanford Wholesalers (seller) records for these three transactions.
No
1
2
3
4
Date
General Journal
Debit
Credit
5
Concord Company’s adjusted trial balance on August 31, its fiscal year-end, follows. It categorizes the
following accounts as selling expenses: sales salaries expense, rent expense—selling space, store
supplies expense, advertising expense. It categorizes the remaining expenses as general and
administrative.
Merchandise inventory (ending)
Other (noninventory) assets
Total liabilities
K. Concord, Capital
K. Concord, Withdrawals
Sales
Sales discounts
Sales returns and allowances
Cost of goods sold
Sales salaries expense
Rent expense—Selling space
Store supplies expense
Advertising expense
Office salaries expense
Rent expense—Office space
Office supplies expense
Totals
Debit
44,000
176,000
Credit
50,820
143,537
8,000
300,960
4,605
19,863
115,842
41,232
14,145
3,612
25,582
37,620
3,612
1,204
495,317
495,317
Beginning merchandise inventory was $35,508. Supplementary records of
merchandising activities for the year ended August 31 reveal the following itemized
costs.
Invoice cost of merchandise purchases
Purchases discounts received
Purchases returns and allowances
Costs of transportation-in
129,360
2,717
6,209
3,900
Required:
1. Compute the company’s net sales for the year.
2. Compute the company’s total cost of merchandise purchased for the year.
3. Prepare a multiple-step income statement that includes separate categories for net sales, cost of
goods sold, selling expenses, and general and administrative expenses.
4. Prepare a single-step income statement that includes these expense categories: cost of goods sold,
selling expenses, and general and administrative expenses.
Hint – the tables below are formatted for the exact numbers of lines you will need to complete each section,
Compute Net Sales
Sales
Net Sales
Cost of Merchandise Purchased
Total cost of merchandise purchased
–
Calculate Selling Expense
Total cost of merchandise purchased
–
Concord COMPANY
Income Statement
For Year Ended August 31
Sales
–
Net sales
–
Gross profit
Expense
–
Total selling expenses
–
General and administrative expenses
Total general and administrative
expenses
Total expenses
Net income
–
Concord COMPANY
Income Statement
For Year Ended August 31
Net sales
Expenses
–
Total expenses
Net income
–
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Formatting
Title Page
Citation
Outline
