Академический Документы
Профессиональный Документы
Культура Документы
MERCHANDISING
OPERATIONS AND
THE MULTIPLE-STEP
INCOME STATEMENT
5-1
Learning
Learning Objectives
Objectives
After studying this chapter, you should be able to:
5-2
1.
2.
3.
4.
5.
6.
7.
Preview of Chapter 5
Financial Accounting
Seventh Edition
Kimmel Weygandt Kieso
5-3
Merchandising
Merchandising Operations
Operations
Merchandising Companies
Buy and Sell Goods
Retailer
Wholesaler
Consumer
Merchandising
Merchandising Operations
Operations
Income Measurement
Sales
Revenue
Less
Cost of
Goods Sold
Not used in a
Service business.
Equals
Gross
Profit
5-5
Illustration 5-1
Income measurement process for a
merchandising company
Less
Operating
Expenses
Equals
Net
Income
(Loss)
Merchandising
Merchandising Operations
Operations
Operating
Cycles
Illustration 5-2
The operating
cycle of a
merchandising
company
ordinarily is longer
than that of a
service
company.
5-6
Merchandising
Merchandising Operations
Operations
Flow of Costs
Illustration 5-3
Merchandising
Merchandising Operations
Operations
Flow of Costs
Perpetual System
5-8
Merchandising
Merchandising Operations
Operations
Flow of Costs
Periodic System
5-9
800,000
Goods available for sale
LO 1
Merchandising
Merchandising Operations
Operations
Flow of Costs
Advantages of the Perpetual System
5-10
5-11
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
5-12
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Illustration 5-5
Inventory
Accounts payable
5-13
3,800
3,800
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Freight Costs Terms of Sale
Illustration 5-6
Shipping terms
5-14
LO 2
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Illustration: Assume upon delivery of the goods on May 6,
Sauk Stereo pays Public Freight Company $150 for freight
charges, the entry on Sauk Stereos books is:
May 6
Inventory
150
Cash
150
Freight-out
Cash
5-15
150
150
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Purchase Returns and Allowances
Purchaser may be dissatisfied because goods are damaged
or defective, of inferior quality, or do not meet specifications.
5-16
Purchase Return
Purchase Allowance
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Illustration: Assume Sauk Stereo returned goods costing
$300 to PW Audio Supply on May 8.
May 8
Accounts payable
Inventory
5-17
300
300
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Review Question
In a perpetual inventory system, a return of defective
merchandise by a purchaser is recorded by crediting:
a. Purchases
b. Purchase Returns
c. Purchase Allowance
d. Inventory
5-18
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Purchase Discounts
Credit terms may permit buyer to claim a cash discount
for prompt payment.
Advantages:
5-19
Example:
Credit
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Purchase Discounts - Terms
5-20
2/10, n/30
1/10 EOM
n/10 EOM
2% discount if
paid within 10
days, otherwise
net amount due
within 30 days.
1% discount if
paid within first 10
days of next
month.
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Illustration: Assume Sauk Stereo pays the balance due of
$3,500 (gross invoice price of $3,800 less purchase returns
and allowances of $300) on May 14, the last day of the
discount period. Prepare the journal entry Sauk Stereo
makes on May 14 to record the payment.
May 14
Accounts payable
Inventory
Cash
3,500
70
3,430
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Illustration: If Sauk Stereo failed to take the discount, and
instead made full payment of $3,500 on June 3, the journal
entry would be:
June 3
Accounts payable
Cash
5-22
3,500
3,500
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Purchase Discounts
Should discounts be taken when offered?
5-23
Recording
Recording Purchases
Purchases of
of Merchandise
Merchandise
Summary of Purchasing Transactions
4th - Purchase
6th Freight-in
$3,800
150
Balance
$3,580
5-24
$300
70
8th - Return
14th - Discount
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
5-25
Performance obligation is
satisfied when the goods
are transferred from the
seller to the buyer.
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Journal Entries to Record a Sale
#1
XXX
Sales revenue
#2
5-26
XXX
XXX
XXX
Selling
Price
Cost
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Illustration: PW Audio Supply records the sale of $3,800
on May 4 to Sauk Stereo on account (Illustration 5-5) as
follows (assume the merchandise cost PW Audio Supply
$2,400).
May 4
Accounts receivable
3,800
Sales revenue
4
5-27
3,800
2,400
2,400
LO 3 Explain the recording of sales revenues
under a perpetual inventory system.
5-28
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Sales Returns and Allowances
5-29
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Illustration: Prepare the entry PW Audio Supply would make
to record the credit for returned goods that had a $300 selling
price (assume a $140 cost). Assume the goods were not
defective.
May 8
300
Accounts receivable
8
Inventory
140
5-30
300
140
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Illustration: Assume the returned goods were defective
and had a scrap value of $50, PW Audio would make the
following entries:
May 8
300
Accounts receivable
8
Inventory
50
5-31
300
50
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Review Question
The cost of goods sold is determined and recorded each
time a sale occurs in:
a. periodic inventory system only.
b. a perpetual inventory system only.
c. both a periodic and perpetual inventory system.
d. neither a periodic nor perpetual inventory system.
5-32
5-33
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Sales Discount
5-34
Recording
Recording Sales
Sales of
of Merchandise
Merchandise
Illustration: Assume Sauk Stereo pays the balance due of
$3,500 (gross invoice price of $3,800 less purchase returns
and allowances of $300) on May 14, the last day of the
discount period. Prepare the journal entry PW Audio Supply
makes to record the receipt on May 14.
May 14
3,430 *
Cash
Sales discounts
70
Accounts receivable
3,500
Income
Income Statement
Statement Presentation
Presentation
Single-Step Income Statement
5-36
Income
Income Statement
Statement Presentation
Presentation
SingleStep
Illustration 5-7
5-37
LO 4
Income
Income Statement
Statement Presentation
Presentation
Multiple-Step Income Statement
5-38
Income
Income Statement
Statement Presentation
Presentation
MultipleStep
Illustration 5-8
Key
Line
Items
5-39
LO 4
MultipleMultipleStep
Step
Illustration 5-11
Key Items:
5-40
Net sales
LO 4
MultipleMultipleStep
Step
Illustration 5-11
Key Items:
Net sales
Gross profit
5-41
LO 4
MultipleMultipleStep
Step
Illustration 5-11
Key Items:
Net sales
Gross profit
Operating
expenses
5-42
LO 4
MultipleMultipleStep
Step
Illustration 5-11
Key Items:
Net sales
Gross profit
Operating
expenses
Nonoperating
activities
5-43
LO 4
MultipleMultipleStep
Step
Illustration 5-11
Key Items:
Net sales
Gross profit
Operating
expenses
Nonoperating
activities
5-44
LO 4
MultipleMultipleStep
Step
Illustration 5-11
Key Items:
Net sales
Gross profit
Operating
expenses
Nonoperating
activities
Net income
5-45
LO 4
Income
Income Statement
Statement Presentation
Presentation
Review Question
The multiple-step income statement for a merchandiser
shows each of the following features except:
a. gross profit.
b. cost of goods sold.
c. a sales revenue section.
d. investing activities section.
5-46
5-47
Income
Income Statement
Statement Presentation
Presentation
Determining Cost of Goods Sold Under a
Periodic System
5-48
Income
Income Statement
Statement Presentation
Presentation
Determining Cost of Goods Sold Under a
Periodic System
Illustration 5-13
5-49
LO 5
$ 3,400
Freight-In
Purchases
162,500
Beginning Inventory
Ending Inventory
20,000
6,100
18,000
5,200
Assuming that Aerosmith Company uses the periodic system, compute (a) cost of
goods purchased and (b) cost of goods sold.
Solution
Beginning Inventory
$ 18,000
Purchases
$ 162,500
- 5,200
Purchase Discounts
- 3,400
Freight-In
160,000 (a)
178,000
Ending Inventory
- 20,000
+ 6,100
$ 158,000 (b)
LO 5 Determine cost of goods sold under a periodic system.
Evaluating
Evaluating Profitability
Profitability
Gross Profit Rate
May be expressed as a percentage by dividing the amount
of gross profit by net sales.
A decline in the gross profit rate might have several causes.
5-51
Evaluating
Evaluating Profitability
Profitability
Gross Profit Rate
Illustration 5-15
Why does REIs gross profit rate differ so much from that of
Dicks Sporting Goods and the industry average?
5-52
Evaluating
Evaluating Profitability
Profitability
Profit Margin Ratio
Measures the percentage of each dollar of sales that results
in net income.
How do the gross profit rate and profit margin ratio differ?
5-53
Evaluating
Evaluating Profitability
Profitability
Profit Margin Ratio
Illustration 5-17
How does REI compare to its competitors? Its profit margin was lower
than Dicks in 2010 and was less than the industry average. Thus, its
profit margin does not suggest exceptional profitability.
5-54
Evaluating
Evaluating Profitability
Profitability
Earnings have high quality if they provide a
full and transparent depiction of how a
company performed.
5-55
Periodic
Inventory
System
Appendix
Appendix 5A
5A
5-56
Periodic
Inventory
System
Appendix
Appendix 5A
5A
Purchases
3,800
Accounts payable
5-57
3,800
Periodic
Inventory
System
Appendix
Appendix 5A
5A
Freight Costs
Freight-in (Transportation-in)
Cash
5-58
150
150
Periodic
Inventory
System
Appendix
Appendix 5A
5A
Purchase Returns and Allowances
Accounts payable
300
5-59
300
Periodic
Inventory
System
Appendix
Appendix 5A
5A
Purchase Discounts
Accounts payable
Purchase discounts
Cash
5-60
3,500
70
3,430
Periodic
Inventory
System
Appendix
Appendix 5A
5A
Recording Sales of Merchandise
Accounts receivable
Sales revenue
3,800
3,800
5-61
Periodic
Inventory
System
Appendix
Appendix 5A
5A
Sales Returns and Allowances
5-62
300
300
Periodic
Inventory
System
Appendix
Appendix 5A
5A
Sales Discounts
Cash
3,430
Sales discounts
Accounts receivable
5-63
70
3,500
Periodic
Inventory
System
Appendix
Appendix 5A
5A
Comparison of Entries
5-64
Periodic
Inventory
System
Appendix
Appendix 5A
5A
Comparison of Entries
5-65
Key Points
5-66
LO 9 Compare the procedures for the merchandising under GAAP and IFRS.
Key Points
5-67
LO 9 Compare the procedures for the merchandising under GAAP and IFRS.
Key Points
5-68
LO 9 Compare the procedures for the merchandising under GAAP and IFRS.
Key Points
5-69
LO 9 Compare the procedures for the merchandising under GAAP and IFRS.
5-70
LO 9 Compare the procedures for the merchandising under GAAP and IFRS.
IFRS Practice
Which of the following would not be included in the definition of
inventory under IFRS?
a) Photocopy paper held for sale by an office-supply store.
b) Stereo equipment held for sale by an electronics store.
c) Used office equipment held for sale by the human relations
department of a plastics company.
d) All of the above would meet the definition.
5-71
LO 9 Compare the procedures for the merchandising under GAAP and IFRS.
IFRS Practice
Which of the following would not be a line item of a company
reporting costs by nature?
a) Depreciation expense.
b) Salaries expense.
c) Interest expense.
d) Manufacturing expense.
5-72
LO 9 Compare the procedures for the merchandising under GAAP and IFRS.
IFRS Practice
Which of the following would not be a line item of a company
reporting costs by function?
a) Administration.
b) Manufacturing.
c) Utilities expense.
d) Distribution.
5-73
LO 9 Compare the procedures for the merchandising under GAAP and IFRS.
Copyright
Copyright
Copyright 2013 John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that permitted in
Section 117 of the 1976 United States Copyright Act without the
express written permission of the copyright owner is unlawful.
Request for further information should be addressed to the
Permissions Department, John Wiley & Sons, Inc. The purchaser
may make back-up copies for his/her own use only and not for
distribution or resale. The Publisher assumes no responsibility for
errors, omissions, or damages, caused by the use of these
programs or from the use of the information contained herein.
5-74