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Problem-1
During the month of August, Karlsson Industries had the following transactions:
| Aug. 2 | Paid cash for the August rent of $1,500. |
| Aug. 6 | Purchased supplies of $250 on account. |
| Aug. 10 | Collected $5,700 from customers on account. |
| Aug. 15 | Received $2,200 cash for services to be rendered in September. |
| Aug. 21 | Paid for supplies purchased on account on August 6. |
| Aug. 28 | Billed customers for $7,500 for services provided in August. |
| Aug. 31 | Paid $150 cash for utilities expense. |
For each transaction fill in the below table for the date of the transaction, the account name to be debited and credited and the effect on the respective account: increase to the account and for a decrease to the account.
Problem-2
Use the ratios below and statement of financial position to fill in the missing information. (Round debt to total assets ratio to 1 decimal place, e.g. 2.1%.)
Bramble Corporation had the following comparative statements of financial position:
| Bramble Corporation | ||
| Statement of Financial Position | ||
| Assets | ||
| Dec. 31, 2018 | Dec. 31, 2017 | |
| Current Assets | ||
| Cash | $77,000 | $82,000 |
| Held for trading investments | 97,000 | |
| Accounts receivable | 142,000 | 137,500 |
| Inventory | 236,000 | 211,000 |
| Prepaid expenses | 80,000 | 47,000 |
| Total Current Assets | $632,000 | |
| Property, plant and equipment (net) | 197,000 | 200,000 |
| Total Assets | $829,000 | |
| Liabilities | ||
| Current Liabilities | ||
| Accounts payable | $318,385 | $308,000 |
| Salaries payable | ||
| Income tax payable | 51,865 | 39,000 |
| Total Current Liabilities | ||
| Mortgage Payable | 60,578 | 77,795 |
| Total Liabilities | $513,795 | |
| Shareholders Equity | ||
| Common shares | 275,000 | $275,000 |
| Retained earnings | 41,993 | 69,705 |
| Total Liabilities and Shareholders Equity | $829,000 | $858,500 |
| 2018 | 2017 | |
| Current Ratio | 1.4:1 | 1.5:1 |
| Working Capital | $222,500 | |
| Debt to total Assets | 61.8% | |
Problem-3
For the following transactions, prepare journal entries needed to adjust the company’s book. (In cases where no
entry is required, please select the option “No journal entry required” for your answer to grade correctly.
a. Outstanding checks of $12,000.
b. Bank service charge of $15.
c. Deposit in transit of $2,300.
d. Interest earned of $5.
Problem-4
Merchandise costing $1,440 is sold for $3,100 on terms 2/10, n/30.
Required:
If the buyer pays within the discount period, what amount will be reported on the income statement as net sales and as gross profit?
Problem-5
Merchandise costing $6,000 is sold for $7,200 on terms 2/10, n/30. If the buyer pays within the discount period.
Required:
Prepare the journal entries needed at the time of sale and collection, assuming the company uses a perpetual
inventory system.
Problem-6
The following transactions were selected from the records of Evergreen Company:
July 12 Sold merchandise to Wally Butler, who paid the $1,300 purchase with cash. The goods cost Evergreen Company $871.
15 Sold merchandise to Claudio’s Chair Company at a selling price of $6,100 on terms 3/10, n/30. The goods cost Evergreen Company $4,087.
20 Sold merchandise to Otto’s Ottomans at a selling price of $4,600 on terms 3/10, n/30. The goods cost Evergreen Company $3,082.
23 Collected payment from Claudio’s Chair Company from the July 15 sale.
Aug. 25 Collected payment from Otto’s Ottomans from the July 20 sale.
Required:
Assuming that Sales Discounts are reported as contra-revenue, compute Net Sales for the two months ended August
31.
Problem-7
The following transactions were selected from the records of Evergreen Company:
July 12 Sold merchandise to Wally Butler, who paid the $1,000 purchase with cash. The goods cost Evergreen Company $600.
15 Sold merchandise to Claudio’s Chair Company at a selling price of $5,000 on terms 3/10, n/30. The goods cost Evergreen Company $3,500.
20 Sold merchandise to Otto’s Ottomans at a selling price of $3,000 on terms 3/10, n/30. The goods cost Evergreen Company $1,900.
23 Collected payment from Claudio’s Chair Company from the July 15 sale.
Aug. 25 Collected payment from Otto’s Ottomans from the July 20 sale.
Required:
Prepare journal entries to record the transactions, assuming Evergreen Company uses a perpetual inventory system.
Problem-8
Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual inventory system. The following
transactions (summarized) have been selected from 2010:
a. Sold merchandise for cash (cost of merchandise $26,997). $58,700
b. Received merchandise returned by customers as unsatisfactory (but in perfect condition), for cash refund (original cost of merchandise $460). 700
c. Sold merchandise (costing $4,150) to a customer, on account with terms 2/10, n/30. 10,300
d. Collected half of the balance owed by the customer in (c) within the discount period. 5,047
e. Granted an allowance to the customer in (c). 180
Requirement 1:
Compute Sales Revenue, Net Sales, and Gross Profit for Hair World.
Requirement 2:
Compute the gross profit percentage.
Requirement 3:
Prepare journal entries to record transactions (a)–(e).