kellwilliams
Jul 26, 2009, 05:24 PM
Check (2) $88,600;
(3) Gross profit, $112,150;
Net income, $22,750;
(4) Total expenses, $172,000
Problem 5-5A
Preparing closing entries and
interpreting information about
discounts and returns
C4 P3
Use the data for BizKid Company in Problem 5-4A to complete the following requirements:
Required
1. Prepare closing entries as of August 31, 2005 (the perpetual inventory system is used).
Analysis Component
2. The company makes all purchases on credit, and its suppliers uniformly offer a 3% sales discount.
Does it appear that the company’s cash management system is accomplishing the goal of taking
all available discounts? Explain.
3. In prior years, the company experienced a 5% returns and allowance rate on its sales, which means
approximately 5% of its gross sales were eventually returned outright or caused the company to
grant allowances to customers. How do this year’s results compare to prior years’ results?
Check (1) $22,750 Dr. to close
Income Summary
Debit Credit
Merchandise inventory . . . . . . . . . . . . $ 31,000
Other (noninventory) assets . . . . . . . . 120,400
Total liabilities . . . . . . . . . . . . . . . . . . $ 35,000
N. Kidman, Capital . . . . . . . . . . . . . . . 101,650
N. Kidman, Withdrawals . . . . . . . . . . . 8,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . 212,000
Sales discounts . . . . . . . . . . . . . . . . . 3,250
Sales returns and allowances . . . . . . . 14,000
Cost of goods sold . . . . . . . . . . . . . . 82,600
Sales salaries expense . . . . . . . . . . . . 29,000
Rent expense—Selling space . . . . . . . 10,000
Store supplies expense . . . . . . . . . . . . 2,500
Advertising expense . . . . . . . . . . . . . . 18,000
Office salaries expense . . . . . . . . . . . . 26,500
Rent expense—Office space . . . . . . . 2,600
Office supplies expense . . . . . . . . . . . 800
Totals . . . . . . . . . . . . . . . . . . . . . . . . $348,650 $348,650
Problem 5-4A
Computing merchandising
amounts and formatting
income statements
C4 P4
BizKid Company’s adjusted trial balance on August 31, 2005, its fiscal year-end, follows
(3) Gross profit, $112,150;
Net income, $22,750;
(4) Total expenses, $172,000
Problem 5-5A
Preparing closing entries and
interpreting information about
discounts and returns
C4 P3
Use the data for BizKid Company in Problem 5-4A to complete the following requirements:
Required
1. Prepare closing entries as of August 31, 2005 (the perpetual inventory system is used).
Analysis Component
2. The company makes all purchases on credit, and its suppliers uniformly offer a 3% sales discount.
Does it appear that the company’s cash management system is accomplishing the goal of taking
all available discounts? Explain.
3. In prior years, the company experienced a 5% returns and allowance rate on its sales, which means
approximately 5% of its gross sales were eventually returned outright or caused the company to
grant allowances to customers. How do this year’s results compare to prior years’ results?
Check (1) $22,750 Dr. to close
Income Summary
Debit Credit
Merchandise inventory . . . . . . . . . . . . $ 31,000
Other (noninventory) assets . . . . . . . . 120,400
Total liabilities . . . . . . . . . . . . . . . . . . $ 35,000
N. Kidman, Capital . . . . . . . . . . . . . . . 101,650
N. Kidman, Withdrawals . . . . . . . . . . . 8,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . 212,000
Sales discounts . . . . . . . . . . . . . . . . . 3,250
Sales returns and allowances . . . . . . . 14,000
Cost of goods sold . . . . . . . . . . . . . . 82,600
Sales salaries expense . . . . . . . . . . . . 29,000
Rent expense—Selling space . . . . . . . 10,000
Store supplies expense . . . . . . . . . . . . 2,500
Advertising expense . . . . . . . . . . . . . . 18,000
Office salaries expense . . . . . . . . . . . . 26,500
Rent expense—Office space . . . . . . . 2,600
Office supplies expense . . . . . . . . . . . 800
Totals . . . . . . . . . . . . . . . . . . . . . . . . $348,650 $348,650
Problem 5-4A
Computing merchandising
amounts and formatting
income statements
C4 P4
BizKid Company’s adjusted trial balance on August 31, 2005, its fiscal year-end, follows