ACCT 201                         Reporting and                 4           Chapter                         Analyzing Merch...
ACCT 201           Service Organizations            Service organizations sell time toACCT 201            earn revenue.   ...
ACCT 201           Service Organizations            Income StatementACCT 201                         Service Firm         ...
ACCT 201           Merchandising Companies            Merchandising companies sellACCT 201            products to earn rev...
ACCT 201           Merchandising Companies           Income StatementACCT 201                     Merchandising Firm      ...
ACCT 201           Merchandising Activities                          Merchandising CompaniesACCT 201           Manufacture...
ACCT 201           Merchandising CompaniesACCT 201                                   Merchandising Company                ...
Classified Balance SheetACCT 201                              Toys-For-Kids, Inc.                                        B...
ACCT 201           Operating Cycle            Begins with the purchase ofACCT 201            merchandise and ends with the...
ACCT 201           Operating Cycle – Cash Sale                        SaleACCT 201                               Purchases...
Operating Cycle – Credit Sale               Sale                           Accounts                           ReceivableIn...
ACCT 201             Inventory Systems           Beginning           inventory      +       Net cost of                   ...
ACCT 201            PeriodicACCT 201           Inventory            SystemsACCT 201
ACCT 201           Periodic Inventory System            Physically count inventory, usually atACCT 201            end of a...
Periodic Inventory Method          When               Inventory isAccts. Payable Purchased                Pur. Disc.      ...
Cost of Goods Sold           Component       AmountBeginning Inventory             $52,800Net Purchases                   ...
ACCT 201ACCT 201           Perpetual           Inventory            SystemsACCT 201
ACCT 201           Perpetual Inventory System            Continuous records are kept of theACCT 201            quantity an...
Perpetual Inventory Method     Accts. Pay                 Pur. Disc.              xxx                      xxx            ...
ACCT 201           Perpetual Inventory System            In a perpetual inventory system, eachACCT 201            purchase...
ACCT 201   ACCT 201   ACCT 201
ACCT 201           Merchandise Purchases            On June, 20, Melton CompanyACCT 201            purchased $14,000 of me...
ACCT 201Main Source, Inc.                                         Invoice614 Tech Avenue                                 ...
ACCT 201           Trade Discounts            Used by manufacturers andACCT 201            wholesalers to change selling p...
Purchase Discounts        A deduction from the invoice        price granted to induce early        payment of the amount d...
Purchase Discounts 2/10,n/30             Number of             Number of                Days                Days       Oth...
ACCT 201           Purchase Discounts            On May 7, Martin, Inc. purchasedACCT 201            $27,000 of Merchandis...
ACCT 201           Purchase Discounts             On May 15, Martin, Inc. paid theACCT 201             amount due on the p...
ACCT 201           Purchase Discounts            After we post these entries, theACCT 201            accounts involved loo...
ACCT 201           Managing Discounts                    Annual                                                  Rate     ...
Purchase Returns andACCT 201           Allowances            Purchase Return . . .ACCT 201             Merchandise returne...
Purchase Returns andACCT 201           Allowances             On May 9, Barbee, Inc. purchasedACCT 201             $20,000...
Purchase Returns andACCT 201           Allowances             On May 10, Barbee, Inc. returnedACCT 201             $500 of...
Purchase Returns andACCT 201           Allowances             On May 18, Barbee, Inc. paid theACCT 201             amount ...
Transportation Costs     Seller                           BuyerFOB shipping point                 FOB destination  (buyer ...
ACCT 201           Transportation Costs            On May 12, Barbee, Inc. purchasedACCT 201            $8,000 of Merchand...
Recording PurchasesACCT 201           Information                                 Matrix, Inc.ACCT 201                   T...
ACCT 201   ACCT 201   ACCT 201
ACCT 201                   Sales Transactions            On March 18, TwoCom sold $25,000            of merchandise on acc...
ACCT 201                      Sales Discounts             On June 8, Borey Co. sold             merchandise costing $3,500...
ACCT 201                Sales Discounts           On June 17, Borey Co. received a           check for $5,880 in full paym...
ACCT 201           Sales Returns and Allowances            On June 12, Borey Co. sold merchandise            costing $4,00...
ACCT 201           Sales Returns and Allowances           On June 14, merchandise with a sales           price of $800 and...
ACCT 201           Sales Returns and Allowances           On June 20, Borey received the           amount owed to it from ...
Exh.ACCT 201                                          6-11           Recording Sales InformationACCT 201ACCT 201          ...
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  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Chapter 4: Reporting and Analyzing Merchandising Activities April 22, 2013 Dr. Fred Barbee
  • Marchandis

    1. 1. ACCT 201 Reporting and 4 Chapter Analyzing Merchandising ActivitiesACCT 201 UAA – ACCT 201ACCT 201 Principles of Financial Accounting Dr. Fred Barbee
    2. 2. ACCT 201 Service Organizations Service organizations sell time toACCT 201 earn revenue. Examples: accounting firms, law firms, and plumbing services.ACCT 201
    3. 3. ACCT 201 Service Organizations Income StatementACCT 201 Service Firm Fees Earned $50,000 Operating Expenses 36,000ACCT 201 Net Income $14,000
    4. 4. ACCT 201 Merchandising Companies Merchandising companies sellACCT 201 products to earn revenue. Examples: sporting goods, clothing, and auto parts storesACCT 201
    5. 5. ACCT 201 Merchandising Companies Income StatementACCT 201 Merchandising Firm Sales $150,000 Cost of Goods Sold 90,000 Gross Profit (Margin) $60,000ACCT 201 Operating Expenses 35,000 Net Income $25,000
    6. 6. ACCT 201 Merchandising Activities Merchandising CompaniesACCT 201 Manufacturer Wholesaler Retailer CustomerACCT 201
    7. 7. ACCT 201 Merchandising CompaniesACCT 201 Merchandising Company Balance Sheet December 31, 2002 Assets Liabilities Cash $ 10,200 Accounts payable $ 1,200 Merchandise Inventory 1,200 Notes payable 4,000 Equipment 16,000 Total liabilities $ 5,200 Equity 22,200ACCT 201 Total liabilities and Total assets $ 27,400 equity $ 27,400
    8. 8. Classified Balance SheetACCT 201 Toys-For-Kids, Inc. Balance Sheet December 31, 2002 Assets Current assets Cash $ 24,580 Accounts receivable 98,400 Merchandise inventory 125,090 Supplies 4,700 Prepaid insurance 6,800 Total current assets $ 259,570 Plant assetsACCT 201 Land 75,000 Building $ 421,500 Less: accumulated depreciation 117,200 304,300 Equipment 114,720 Less: accumulated depreciation 41,900 72,820 Furniture and fixtures 62,800 Less: accumulated depreciation 21,000 41,800 Total plant assets 493,920 Total assets $ 753,490 Liabilities Current liabilities Accounts payable $ 187,600ACCT 201 Wages payable 15,875 Short-term bank note 25,000 Total current liabilities $ 228,475 Long-term notes payable 275,000 Equity Common stock 200,000 Retained earnings 50,015 Total liabilities and equity $ 753,490
    9. 9. ACCT 201 Operating Cycle Begins with the purchase ofACCT 201 merchandise and ends with the collection of cash from the sale of merchandise.ACCT 201
    10. 10. ACCT 201 Operating Cycle – Cash Sale SaleACCT 201 PurchasesACCT 201 Inventory
    11. 11. Operating Cycle – Credit Sale Sale Accounts ReceivableInventory Collection Purchases
    12. 12. ACCT 201 Inventory Systems Beginning inventory + Net cost of purchasesACCT 201 Merchandise available for saleACCT 201 Cost of Ending Inventory + Goods Sold
    13. 13. ACCT 201 PeriodicACCT 201 Inventory SystemsACCT 201
    14. 14. ACCT 201 Periodic Inventory System Physically count inventory, usually atACCT 201 end of accounting period. No detailed records of the actual inventory are maintained during the accounting period.ACCT 201 Less costly than perpetual inventory method, but provides less information.
    15. 15. Periodic Inventory Method When Inventory isAccts. Payable Purchased Pur. Disc. xxx xxx Purchases xxx Pur. R&A Inventory xxx BI xxx The Inventory Account is not updated when inventory is purchased.
    16. 16. Cost of Goods Sold Component AmountBeginning Inventory $52,800Net Purchases 126,860Goods Available for Sale 179,660Less: Ending Inventory 48,300Cost of Goods Sold $131,660
    17. 17. ACCT 201ACCT 201 Perpetual Inventory SystemsACCT 201
    18. 18. ACCT 201 Perpetual Inventory System Continuous records are kept of theACCT 201 quantity and, usually, the cost of individual items as they are bought and sold. More effective for providingACCT 201 information about quantities and ensuring optimal customer service.
    19. 19. Perpetual Inventory Method Accts. Pay Pur. Disc. xxx xxx Purchases WhenPurchased xxx Pur. R&A Inventory xxx COGS xxx xxx xxx When Sold
    20. 20. ACCT 201 Perpetual Inventory System In a perpetual inventory system, eachACCT 201 purchase and sale of merchandise is recorded in an inventory account. In this way, the inventory records always (perpetually) disclose theACCT 201 amount of inventory on hand the the amount sold.
    21. 21. ACCT 201 ACCT 201 ACCT 201
    22. 22. ACCT 201 Merchandise Purchases On June, 20, Melton CompanyACCT 201 purchased $14,000 of merchandise inventory paying cash. GENERAL JOURNAL Page 55 Date Description PR Debit Credit Jun 20 Merchandise Inventory 14,000ACCT 201 Cash 14,000
    23. 23. ACCT 201Main Source, Inc. Invoice614 Tech Avenue Date NumberNashville, TN 37651  5/4/02 358-BI S o  Barbee, Inc. Name: Seller Invoice date Purchaser Invoice l d Attn: Tom Bell Order number Credit terms Order number Credit terms Address: One Willow PlazaACCT 201 T Cookeville, Tennessee Freight terms Goods Invoice amount Goods Invoice amount o 38501   P.O. 167 Sales: 25 Terms 2/10,n/30 Ship: FedEx PrepaidItem Description Quanity Price AmountAC417  250 Backup System 500 $ 54.00 $ 27,000ACCT 201 Sub Total 27,000We appreciate your business! Ship Chg. - Tax - Total $ 27,000 
    24. 24. ACCT 201 Trade Discounts Used by manufacturers andACCT 201 wholesalers to change selling prices without republishing their catalogs. Example JenCo, Inc. offers a 30% tradeACCT 201 discount on orders of 1,000 units or more of their popular product Racer. Each Racer has a list price of $5.25.
    25. 25. Purchase Discounts A deduction from the invoice price granted to induce early payment of the amount due.Terms Discount Period Credit PeriodTime Full amount Full amount due Due less discountPurchase or Sale Exhibit 4-7
    26. 26. Purchase Discounts 2/10,n/30 Number of Number of Days Days Otherwise, Otherwise,DiscountDiscount Discount Is Discount Is Net (or All) Net (or All) Credit CreditPercent Percent Available Available Is Due Is Due Period Period
    27. 27. ACCT 201 Purchase Discounts On May 7, Martin, Inc. purchasedACCT 201 $27,000 of Merchandise Inventory on account, credit terms are 2/10, n/30. GENERAL JOURNAL Page 49ACCT 201 Date Description PR Debit Credit May 7 Merchandise Inventory 27,000 Accounts Payable 27,000
    28. 28. ACCT 201 Purchase Discounts On May 15, Martin, Inc. paid theACCT 201 amount due on the purchase of May 7. GENERAL JOURNAL Page 55 Date Description PR Debit Credit May 15 Accounts payable 27,000 Cash 26,460ACCT 201 Merchandise inventory 540 $27,000 × 2% = $540 discount
    29. 29. ACCT 201 Purchase Discounts After we post these entries, theACCT 201 accounts involved look like this: Merchandise Inventory Accounts Payable 5/7 27,000 5/15 540 5/15 27,000 5/7 27,000ACCT 201 Bal. 26,460 Bal. 0
    30. 30. ACCT 201 Managing Discounts Annual Rate If we fail to take a 2/10, n/30ACCT 201 discount, is it really expensive? 365 / 20 X 2% = 36.5% Days in Percent paid to keepACCT 201 Year money Number of additional days before payment
    31. 31. Purchase Returns andACCT 201 Allowances Purchase Return . . .ACCT 201 Merchandise returned by the purchaser to the supplier. Purchase Allowance . . .ACCT 201 A reduction in the cost of defective merchandise received by a purchaser from a supplier.
    32. 32. Purchase Returns andACCT 201 Allowances On May 9, Barbee, Inc. purchasedACCT 201 $20,000 of Merchandise Inventory on account, credit terms are 2/10, n/30. GENERAL JOURNAL Page 34 Date Description PR Debit CreditACCT 201 May 9 Merchandise Inventory 20,000 Accounts Payable 20,000
    33. 33. Purchase Returns andACCT 201 Allowances On May 10, Barbee, Inc. returnedACCT 201 $500 of defective merchandise to the supplier. GENERAL JOURNAL JOURNAL Page 37 Page 37 Date Description Description PR Debit Credit PR Debit CreditACCT 201 May 10 Accounts payable 500 Merchandise Inventory 500
    34. 34. Purchase Returns andACCT 201 Allowances On May 18, Barbee, Inc. paid theACCT 201 amount owed for the May 9 purchase. GENERAL JOURNAL Page 61 Date Description PR Debit Credit May 18 Accounts payable 19,500 Merchandise inventory 390ACCT 201 Cash 19,110
    35. 35. Transportation Costs Seller BuyerFOB shipping point FOB destination (buyer pays) Merchandise (seller pays)
    36. 36. ACCT 201 Transportation Costs On May 12, Barbee, Inc. purchasedACCT 201 $8,000 of Merchandise for cash and also paid $100 transportation costs. GENERAL JOURNAL Page 39 Date Description PR Debit CreditACCT 201 May 12 Merchandise Inventory 8,100 Cash 8,100
    37. 37. Recording PurchasesACCT 201 Information Matrix, Inc.ACCT 201 Total Cost of Merchandise Purchases For Year Ended December 31, 2002 Invoice cost of merchandise purchases $ 692,500 Less: Purchase discounts received (10,388) Purchase returns and allowances (4,275)ACCT 201 Add: Cost of transportation-in 4,895 Total cost of merchandise purchases $ 682,732
    38. 38. ACCT 201 ACCT 201 ACCT 201
    39. 39. ACCT 201 Sales Transactions On March 18, TwoCom sold $25,000 of merchandise on account. The merchandise was carried inACCT 201 inventory at a cost of $18,000. GENERAL JOURNAL Page 3 Date Description PR Debit Credit Mar. 18 Accounts Receivable 25,000ACCT 201 Sales 25,000 Cost of Goods Sold 18,000 Merchandise Inventory 18,000
    40. 40. ACCT 201 Sales Discounts On June 8, Borey Co. sold merchandise costing $3,500 for $6,000 on account. Credit termsACCT 201 were 2/10, n/30. GENERAL JOURNAL Page 3 Date Description PR Debit Credit Jun 8 Accounts Receivable 6,000 Sales 6,000ACCT 201 Cost of Goods Sold 3,500 Merchandise Inventory 3,500
    41. 41. ACCT 201 Sales Discounts On June 17, Borey Co. received a check for $5,880 in full payment of the June 8 sale.ACCT 201ACCT 201
    42. 42. ACCT 201 Sales Returns and Allowances On June 12, Borey Co. sold merchandise costing $4,000 for $7,500 on account The credit terms were 2/10, n/30.ACCT 201 GENERAL JOURNAL Page 4 Date Description PR Debit Credit Jun 12 Accounts Receivable 7,500 Sales 7,500ACCT 201 Cost of Goods Sold 4,000 Merchandise Inventory 4,000
    43. 43. ACCT 201 Sales Returns and Allowances On June 14, merchandise with a sales price of $800 and a cost of $470 was returned to Borey. The return isACCT 201 related to the June 12 sale. GENERAL JOURNAL Page 3 Date Description PR Debit Credit Jun 14 Sales Returns and Allowances 800 Accounts Receivable 800ACCT 201 Merchandise Inventory 470 Cost of Goods Sold 470
    44. 44. ACCT 201 Sales Returns and Allowances On June 20, Borey received the amount owed to it from the sale of June 12.ACCT 201 GENERAL JOURNAL Page 6 Date Description PR Debit Credit Jun 20 Cash 6,566 Sales Discounts 134ACCT 201 Account Receivable 6,700
    45. 45. Exh.ACCT 201 6-11 Recording Sales InformationACCT 201ACCT 201 Sales discounts and returns Sales discounts and returns and allowances are and allowances are Contra Revenue accounts. Contra Revenue accounts.

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