Selected transactions for Niles Co. during March of the current year are listed in Problem 6-1B.InstructionsJournalize the entries to record the transactions of Niles Co. for March using the periodic inventory system.Answer:
Mar. 1 Purchases 43,250Freight In 650Accounts Payable—Haas Co. 43,9005 Purchases 19,175Accounts Payable—Whitman Co. 19,17510 Accounts Payable—Haas Co. 43,900Cash 43,035Purchases Discounts 86513 Purchases 15,550Accounts Payable—Jost Co. 15,55014 Accounts Payable—Jost Co. 3,750Purchases Returns and Allowances 3,75018 Purchases 13,560Accounts Payable—Fairhurst Company 13,56018 Freight In 140Cash 14019 Purchases 6,500Accounts Payable—Bickle Co. 6,50023 Accounts Payable—Jost Co. 11,800Cash 11,564Purchases Discounts 23629 Accounts Payable—Bickle Co. 6,500Cash 6,370Purchases Discounts 13031 Accounts Payable—Fairhurst Company 13,560Cash 13,56031 Accounts Payable—Whitman Co. 19,175Cash 19,175
Selected transactions for Essex Company during July of the current year are listed in Problem 6-3B.InstructionsJournalize the entries to record the transactions of Essex Company for July using the periodic inventory system.Answer:
July 3 Purchases 61,200Freight In 1,450Accounts Payable—Hamling Co. 62,650[$72,000 – ($72,000 × 15%)] = $61,200.5 Purchases 33,450Accounts Payable—Kester Co. 33,4506 Accounts Receivable—Parsley Co. 30,150Sales 30,150[$45,000 – ($45,000 × 33%)] = $30,150.7 Accounts Payable—Kester Co. 6,850Purchases Returns and Allowances 6,85013 Accounts Payable—Hamling Co. 62,650Cash 61,426Purchases Discounts 1,22415 Accounts Payable—Kester Co. 26,600Cash 26,068Purchases Discounts 53216 Cash 29,547Sales Discounts 603Accounts Receivable—Parsley Co. 30,15019 Cash 108,000Sales 108,00022 Accounts Receivable—Tabor Co. 16,650Sales 16,65023 Cash 91,200Sales 91,20028 Sales Returns and Allowances 3,600Accounts Receivable—Tabor Co. 3,60031 Credit Card Expense 1,650Cash 1,650
On June 30, 2014, the balances of the accounts appearing in the ledger of Simkins Company are as follows:
Cash $ 125,000 Sales Discounts $ 66,000Accounts Receivable 340,000 Purchases 4,100,000Merchandise Inventory, July 1, 2013 415,000 Purchases Returns and Allowances 32,000Office Supplies 9,000 Purchases Discounts 13,000Prepaid Insurance 18,000 Freight In 45,000Land 300,000 Sales Salaries Expense 580,000Store Equipment 550,000 Advertising Expense 315,000Accumulated Depreciation— Delivery Expense 18,000Store Equipment 190,000 Depreciation Expense—Office Equipment 250,000 Store Equipment 12,000Accumulated Depreciation— Miscellaneous Selling Expense 28,000Office Equipment 110,000 Office Salaries Expense 375,000Accounts Payable 85,000 Rent Expense 43,000Salaries Payable 9,000 Insurance Expense 17,000Unearned Rent 6,000 Office Supplies Expense 5,000Notes Payable 50,000 Depreciation Expense—Amy Gant, Capital 825,000 Office Equipment 4,000Amy Gant, Drawing 275,000 Miscellaneous Administrative Expense 16,000Sales 6,748,000 Rent Revenue 32,500Sales Returns and Allowances 92,000 Interest Expense 2,500Instructions1. Does Simkins Company use a periodic or perpetual inventory system? Explain.2. Prepare a multiple-step income statement for Simkins Company for the year ended June 30, 2014. The merchandise inventory as of June 30, 2014, was $508,000.3. Prepare the closing entries for Simkins Company as of June 30, 2014.4. What would be the net income if the perpetual inventory system had been used?Answer:1. Periodic inventory system. Simkins Company uses a periodic inventory system since it maintains accounts for purchases, purchases returns and allowances, purchases discounts, and freight in.
2.SIMKINS COMPANYIncome StatementFor the Year Ended June 30, 2014Revenue from sales:Sales $6,748,000Less: Sales returns and allowances $ 92,000Sales discounts 66,000 158,000Net sales $6,590,000Cost of merchandise sold:Merchandise inventory, July 1, 2013 $ 415,000Purchases $4,100,000Less: Purchases returns and allowances 32,000Purchases discounts 13,000Net purchases $4,055,000Add freight in 45,000Cost of merchandise purchased 4,100,000Cost of merchandise available for sale $4,515,000Less merchandise inventory, 508,000June 30, 2014Cost of merchandise sold 4,007,000Gross profit $2,583,000Expenses:Selling expenses:Sales salaries expense $ 580,000Advertising expense 315,000Delivery expense 18,000Depreciation expense—store equipment 12,000Miscellaneous selling expense 28,000Total selling expenses $ 953,000Administrative expenses:Office salaries expense $ 375,000Rent expense 43,000Insurance expense 17,000Office supplies expense 5,000Depreciation expense—office equipment 4,000Miscellaneous administrative expense 16,000Total administrative expenses 460,000Total operating expenses 1,413,000Income from operations $1,170,000Other income and expense:Rent revenue $ 32,500Less interest expense 2,500 30,000Net income $1,200,0003.
Closing EntriesMerchandise Inventory 508,000Sales 6,748,000Purchases Returns and Allowances 32,000Purchases Discounts 13,000Rent Revenue 32,500Income Summary 7,333,500Income Summary 6,133,500Merchandise Inventory 415,000Sales Returns and Allowances 92,000Sales Discounts 66,000Purchases 4,100,000Freight In 45,000Sales Salaries Expense 580,000Advertising Expense 315,000Delivery Expense 18,000Depreciation Expense—Store Equipment 12,000Miscellaneous Selling Expense 28,000Office Salaries Expense 375,000Rent Expense 43,000Insurance Expense 17,000Office Supplies Expense 5,000Depreciation Expense—Office Equipment 4,000Miscellaneous Administrative Expense 16,000Interest Expense 2,500Income Summary 1,200,000Amy Gant, Capital 1,200,000Amy Gant, Capital 275,000Amy Gant, Drawing 275,0004. $1,200,000. The same net income as under the periodic inventory system
Identify each of the following as relating to (a) the control environment, (b) control procedures, or (c) monitoring.1. Hiring of external auditors to review the adequacy of controls2. Personnel policies3. Safeguarding inventory in a locked warehouseAnswer:1. (c) monitoring2. (a) the control environment3. (b) control procedures
