01 Jul Perpetual and Periodic Inventory System questions
Exercise 1 On October 1, Keiler Motorcycle Shop had an inventory of 20 dirt bikes at a cost of $1,150 each. During the month of October, the following transactions occurred: Oct 3 Purchased 10 bikes at a cost of $1,150 each from the Lyons Bike Company, terms n/30. 6 Sold 10 bikes for $1,500 each, terms n/30. 6 Freight of $250 on the October 6 sale was FOB shipping point. 7 Received credit from the Lyons Bike Company for the return of 2 defective bikes. 13 Issued a credit to a customer for the return of a bike. The bike was returned to inventory. 19 Purchased 8 bikes from Huffy Cycle Company at a cost of $1,125 each, terms 2/10, n/30. 20 Freight of $220 on the October 19 purchase was FOB shipping point. 29 Paid for the October 19 purchase. Instructions a) Using a perpetual inventory system, prepare the journal entries to record the transactions. b) Using Periodic Inventory System, prepare the Journal entries to record the transactions. Exercise 2 Tantramar Shipbuilding Company had the following information available at its year end September 30, 2017. Accounts are listed in alphabetical order for the convenience of the bookkeeper. Advertising Expense ………………………………… 15,000 Cost of Goods Sold ………………………………….. 476,500 Depreciation Expense ………………………………. 41,000 Freight-out ……………………………………………… 7,500 Interest Revenue……………………………………… 11,000 Office Salaries Expense ……………………………. 65,000 Office Supplies ………………………………………… 6,000 Office Supplies Expense …………………………… 7,500 Sales ……………………………………………………… 750,000 Sales Discounts ………………………………………. 12,800 Sales Returns & Allowances ……………………… 25,700 Instructions a) Calculate the gross profit margin for Tantramar. b) Calculate the profit from operations for Tantramar. c) Calculate the profit margin for Tantramar. d) List three actions which Tantramar could take to increase its profit margin. e) If last year’s gross profit margin was 39%, comment on the company’s results this year. Question 3 Presented below is the adjusted trial balance of Katie’s Pet Supplies as at its fiscal year end, November 30, 2017. All accounts are their normal balance (debit or credit). Katie’s uses the periodic inventory system. Accounts payable…………………… $ 32,310 K. Milani, Capital ……………….. $119,480 Accounts receivable ……………….. 13,770 K. Milani, Drawings ……………. 12,000 Accum. depreciation, Building 61,200 Long-term note receivable …… 15,000 Accum. depreciation, equipment . 19,880 Merchandise inventory ……….. 34,360 Advertising expense ……………….. 1,000 Mortgage payable, ……………. 106,000 Cash ……………………………………. 7,500 Prepaid Insurance ……………… 4,500 Building ………………………………… 175,000 Property Tax expense ………… 3,500 Purchases …………………………….. 634,700 Salaries expense……………….. 122,000 Depreciation Expense …………….. 14,000 Salaries payable ………………… 8,500 Equipment…………………………….. 57,000 Sales discounts …………………. 8250 Freight-out expense ……………….. 8,200 Sales returns and allowances. 9,845 Insurance expense …………………. 9,000 Sales revenue …………………… 872,000 Interest expense ……………………. 5,300 Unearned Revenue ……………. 3,000 Land…………………………………….. 85,000 Utilities Expense expense …… 19,800 Freight in ………………………………. 5,060 Rent revenue………………….. 2,800 Purchase discount……………….. 6,300 Purchase return and Allowance 13,315 Additional Information: 1. Katie’s pet supplies uses periodic inventory 2. Physical count determined that the merchandise on hand at Nov 30, 2017 was $37,350. 3. On the Mortgage payable 8500 is due on March 31, 2018. Instruction: a. Prepare the multistep Income Statement, Statement of Owners Equity, and Classified Balance Sheet b. Calculate the Inventory turnover and Liquidity ratio …
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