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Inventory Costs

E7 On June 15, Tunnale Company sold merchandise for $ 1,300 on terms of n/30 to Whist Company. On June 20, Whist Company returned some of the merchandise for a credit of $ 300, and on June 25, Whist paid the balance owed. Give Tunnale's entries to record the sale, return, and receipt of payment under the perpetual inventory system. The cost of the merchandise sold on June 15 was $ 750, and the cost of the merchandise returned to inventory on June 20 was $ 175.

E8 Using the selected year-end account balance at December 31, 20x4, for the Atlanta General Store shown below, prepare a 20x4 income statement. Show the detail of net sales. The company uses the periodic inventory system. Beginning merchandise inventory was $ 52, 000; ending merchandise inventory is $ 44,000.

Account Name Debit Credit
Sales $ 594,000
Sales Returns & Allowances $ 30,400
Purchases 229,600
Purchases Returns & Allowances 8,000
Freight In 11,200
Selling Expenses 97,000
General & Administrative Expenses 74,400

E9 Determine the missing data for each letter in the following three income statements for Leominster Wholesale Paper Company (in thousands):

20x4 20x3 20x2
Gross sales $ (o) (h) $ 286
Sales returns and allowances 24 19 (a)
Net sales (p) 317 (b)
Merchandise inventory, beginning (q) (i) 38
Purchases 192 169 ( c)
Purchases returns and allowances 31 (j) 17
Freight in (r) 29 22
Net cost of purchases 189 (k) (d)
Goods available for sale 222 212 182
Merchandise inventory, ending 39 (L) 42
Cost of Goods sold (s) 179 (e)
Gross Margin 142 (m) 126
Selling expenses (t) 78 (f)
General and Administrative expenses 39 (n) 33
Total operating expenses 130 128 (g)
Net income (u) 10 27

E10 Using the data in E6, give the entries to record each of the transactions under periodic inventory system.

E11 Using the relevant data in E7, give the entries to record each of the transactions under periodic inventory system.

E12 Below are selected account balances of Linley Company for the year ended December 31, 20xx. Prepare closing entries, assuming that the owner of Linley Company, Sandra Linley, withdrew $ 40,000 for personal expenses during the year.

Account Name Debit Credit

Sales $ 297,000
Sales Returns & Allowances $ 15,200
Cost of Goods Sold 113,000
Freight In 5,600
Selling Expenses 48,500
General & Administrative Expenses 37,200

E13 Selected account balances of the Lakeside Grocery Store for the year ended December 31, 20xx, follow. Beginning merchandise inventory was $ 26,000, and ending merchandise inventory is $ 22,000. Prepare closing entries, assuming that the owner of Lakeside Grocery, John Grover, withdrew $ 34, 000 for personal expenses during the year.

Account Name Debit Credit
Sales $ 297,000
Sales Returns & Allowances $ 11,000
Sales Discounts 4,200
Purchases 114,800
Purchases returns and allowances 1,800
Purchases Discounts 2,200
Freight in 5,600
Selling Expenses 48,500
General & Administrative Expenses 37,200

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Solution Summary

E7 On June 15, Tunnale Company sold merchandise for $ 1,300 on terms of n/30 to Whist Company. On June 20, Whist Company returned some of the merchandise for a credit of $ 300, and on June 25, Whist paid the balance owed. Give Tunnale's entries to record the sale, return, and receipt of payment under the perpetual inventory system. The cost of the merchandise sold on June 15 was $ 750, and the cost of the merchandise returned to inventory on June 20 was $ 175.

E8 Using the selected year-end account balance at December 31, 20x4, for the Atlanta General Store shown below, prepare a 20x4 income statement. Show the detail of net sales. The company uses the periodic inventory system. Beginning merchandise inventory was $ 52, 000; ending merchandise inventory is $ 44,000.

Account Name Debit Credit
Sales $ 594,000
Sales Returns & Allowances $ 30,400
Purchases 229,600
Purchases Returns & Allowances 8,000
Freight In 11,200
Selling Expenses 97,000
General & Administrative Expenses 74,400

E9 Determine the missing data for each letter in the following three income statements for Leominster Wholesale Paper Company (in thousands):

20x4 20x3 20x2
Gross sales $ (o) (h) $ 286
Sales returns and allowances 24 19 (a)
Net sales (p) 317 (b)
Merchandise inventory, beginning (q) (i) 38
Purchases 192 169 ( c)
Purchases returns and allowances 31 (j) 17
Freight in (r) 29 22
Net cost of purchases 189 (k) (d)
Goods available for sale 222 212 182
Merchandise inventory, ending 39 (L) 42
Cost of Goods sold (s) 179 (e)
Gross Margin 142 (m) 126
Selling expenses (t) 78 (f)
General and Administrative expenses 39 (n) 33
Total operating expenses 130 128 (g)
Net income (u) 10 27

E10 Using the data in E6, give the entries to record each of the transactions under periodic inventory system.

E11 Using the relevant data in E7, give the entries to record each of the transactions under periodic inventory system.

E12 Below are selected account balances of Linley Company for the year ended December 31, 20xx. Prepare closing entries, assuming that the owner of Linley Company, Sandra Linley, withdrew $ 40,000 for personal expenses during the year.

Account Name Debit Credit

Sales $ 297,000
Sales Returns & Allowances $ 15,200
Cost of Goods Sold 113,000
Freight In 5,600
Selling Expenses 48,500
General & Administrative Expenses 37,200

E13 Selected account balances of the Lakeside Grocery Store for the year ended December 31, 20xx, follow. Beginning merchandise inventory was $ 26,000, and ending merchandise inventory is $ 22,000. Prepare closing entries, assuming that the owner of Lakeside Grocery, John Grover, withdrew $ 34, 000 for personal expenses during the year.

Account Name Debit Credit
Sales $ 297,000
Sales Returns & Allowances $ 11,000
Sales Discounts 4,200
Purchases 114,800
Purchases returns and allowances 1,800
Purchases Discounts 2,200
Freight in 5,600
Selling Expenses 48,500
General & Administrative Expenses 37,200

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