Chapter 5

Retailing Operations
Quick Check
Answers:
1. d
2. a
3. c
4. c
5. b
6. a
7. a
8. b
9. a
10. a

(5 min.) S5-2
Req. 1
a.

Original purchase amount.

Less: Purchase returns

$185 800
18 530

Kmart pays this amount after the discount period

$ 167 270

Kmart pays this amount during the discount period

$167 270 .98...

$ 163 925

b.

Note: both these amounts include GST.

(15 min.) S5-3

Req. 1
Journal
DATE
a. Jul

b.

ACCOUNTS AND EXPLANATIONS

8 Inventory
GST Clearing
Accounts payable

POST.
REF.

12 Accounts payable
GST Clearing
Inventory

c.

DEBIT
168 909.00
16 891.00

CREDIT

185 800.00
18 530.00
1 684.55
16 845.45

15 Accounts payable
($185 800 $18 530)
Inventory ($167 270/1.1 .02)
GST Clearing
Cash ($167 270 .98)

167 270.00

167 270.00

3 041.27
304.13
163 924.60
167 270.00

Req. 2
Cost of Inventory: $149 023
Jul 8
Bal

Inventory
168 909 Jul 12
15
149 023

16 845
3 041

(5-10 min.) S5-4

Req. 1
Journal
DATE

Jul

ACCOUNTS AND EXPLANATIONS

MYERS ENTRIES

1 Inventory
Accounts payable
Purchased inventory on account.
10 Accounts payable

POST.
REF.

DEBIT

CREDIT

61 000
61 000

61 000

Cash ($61 000 .98)

Inventory ($61 000 .02)
Paid within discount period.

59 780
1 220

Req. 2
Myers cost of the inventory

=
=
=

Amount of the cash payment

$61 000 $1 220
$59 780

(10 min.) S5-5

Req. 1
Journal
DATE

ACCOUNTS AND EXPLANATIONS

POST.
REF.

DEBIT

CREDIT

TOMAS ENTRIES
Jul

10

Accounts receivable
Sales revenue
Sale on account.

61 000

Cost of sales
Inventory
Recorded the cost of sales.

32 000

Cash ($61,000 .98)

Sales discounts ($61,000 .02)
Accounts receivable
Cash collection within the
discount period.

59 780
1 220

61 000

32 000

61 000

(15-20 min.) E5-5

Req. 1
Journal
DATE

ACCOUNTS AND EXPLANATIONS

POST.
REF.

DEBIT

CREDIT

Feb

10

10

12

16

23

Inventory
GST Clearing
Accounts payable

2 700
270
2 970

Accounts payable
Inventory
GST Clearing

440

Inventory
GST Clearing
Cash

110
11

400
40

121

Accounts receivable
Sales revenue
GST Clearing

4 785

Cost of sales
Inventory

2 300

Accounts payable ($2 970 $440)

Inventory ($2 300 .04)
GST Clearing
Cash ($2 530 $101)

2 530

Sales returns and allowances

GST Clearing
Accounts receivable
Cash ($4 235 $84)
Sales discounts ($3 850 .02)
GST Clearing
Accounts receivable ($4 785 $550)

4 350
435

2 300

92
9
2 429
500
50
550
4 151
77
7
4 235

(10-15 min.) E5-9

Req. 1
Adjusted balances need to be closed out:
Bitzes, drawings = $43 000
Sales revenue
= ($232 000 + $2 500) = $234 500
Sales discounts = $2 500
Cost of sales
= ($111 500 + $4 800) = $116 300
Selling expense = ($21 100 + $5 100 + $1 000) = $27 200

General expense = ($10 300 + $2 200 + $2 300) = $14 800

Interest expense = $2 300
Req. 2
Journal
DATE
2013
Mar
31

31

31

31

ACCOUNTS AND EXPLANATIONS

CLOSING ENTRIES

POST.
REF.

DEBIT

Sales revenue
Sales discounts
Income summary

234 500

Income summary
Cost of sales
Selling expense
General expense
Interest expense

160 600

CREDIT

2 500
232 000

116 300
27 200
14 800
2 300

Income summary
($232 000 $160 600)
Bitzes, capital

71 400

Bitzes, capital
Bitzes, drawings

43 000

71 400

43 000

Req. 3
Profit was $71 400.
Net sales revenue Expenses = Profit
$232 000 $160 600 = $71 400
(10-15 min.) E5-10
Req. 1
Budget Business Systems
Income Statement (Functional Format)
Year Ended 31 March 2013
Sales revenues:
Less: Sales discounts
Net sales revenue

$234 500
2 500
$232 000

Cost of sales
Gross profit
Operating expenses:
Selling expenses
General expenses

116 300
$115 700
$27 200
14 800

42 000
$73 700

Other revenue (expense):

Finance expense
Profit

(2 300)
$71 400

(10-15 min.) P5A-1

Req. 1
Journal Entry
DATE
Apr

ACCOUNTS AND EXPLANATIONS

Best Pharmacy Entries*
6 Purchases
Accounts payable

POST.
REF.

6 Freight in
Cash
10 Accounts payable
Purchase returns and allowances
15 Accounts payable
Purchase discounts ($2 900 .02)
Cash
27 Accounts payable
($5 800 $900 $2 900)
Cash

DEBIT

CREDIT

5 800
5 800
150
150
900
900
2 900
58
2 842

2 000
2 000

*Best Pharmacy is recording all entries without (ignoring) GST.

DATE
Apr

ACCOUNTS AND EXPLANATIONS

Brighton Medical Supply Entries
6 Accounts receivable
Sales revenue
GST Clearing

10 Sales returns and allowances

GST Clearing
Accounts receivable

POST.
REF.

DEBIT

CREDIT

6 380
5 800
580
900
90
990

15 Cash
Sales discounts ($2 900/1.1 .02)
GST Clearing
Accounts receivable

2 842
53
5

27 Cash
Accounts receivable
($6 380 $990 $2 900)

2 490

2 900

2 490