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E5-20

E5-20
	Journalize the transactions for Santa Fe Art Gift Shop. Explanations are not
	required.
Solution:
	Date	Accounts and Explanation	Debit	Credit

&L&"Arial,Bold"&12HORNGREN's ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 5: Merchandising Operations&R&"Arial,Bold"&10Page &P of &N

P5-31A

P5-31A
	Journalize the transactions that occurred in September 2016 for Cardinal.
	No explanations are needed. Identify each accounts payable and
	accounts receivable with the vendor or customer name.
Solution:
	Date	Accounts and Explanation	Debit	Credit
	Date	Accounts and Explanation	Debit	Credit

&L&"Arial,Bold"&12HORNGREN's ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 5: Merchandising Operations&R&"Arial,Bold"&10Page &P of &N

P5-33A

P5-33A
	Requirements
	1.	Prepare Big Rita’s multi-step income statement for the year ended June 30,
		2016.
	2.	Journalize Big Rita’s closing entries.
	3.	Prepare a post-closing trial balance as of June 30, 2016.
Solution:
	Requirement 1
	BIG RITA'S MUSIC COMPANY
	Income Statement
	Year Ended June 30, 2016
Requirement 2
	Date		Accounts and Explanation		Debit	Credit
Requirement 3
	BIG RITA'S MUSIC COMPANY
	Post-Closing Trial Balance
	June 30, 2016
	Account Title			Balance
				Debit	Credit

&L&"Arial,Bold"&12HORNGREN's ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 5: Merchandising Operations&R&"Arial,Bold"&10Page &P of &N

P5-34A

P5-34A
	Requirements
	1.	Journalize the adjusting entries.
	2.	Prepare Travis Electronics’ adjusted trial balance as of March 31, 2016.
	3.	Prepare Travis Electronics’ multi-step income statement for year ended
		March 31, 2016
	4.	Prepare Travis Electronics’ statement of owner's for year ended
		March 31, 2016.
	5.	Prepare Travis Electronics’ classified balance sheet in report form as of
		March 31, 2016.
Solution:
	Requirement 1
	Date		Accounts and Explanation		Debit	Credit
	Requirement 2
	TRAVIS ELECTRONICS COMPANY
	Adjusted Trial Balance
	March 31, 2016
	Account Title			Balance
				Debit	Credit
	Requirement 3
	TRAVIS ELECTRONICS COMPANY
	Income Statement
	Year Ended March 31, 2016
	Requirement 4
	TRAVIS ELECTRONICS COMPANY
	Statement of Owner's Equity
	Year Ended March 31, 2016
	Requirement 5
	TRAVIS ELECTRONICS COMPANY
	Balance Sheet
	March 31, 2016
	Assets
	Liabilities
	Owner's Equity

&L&"Arial,Bold"&12HORNGREN's ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 5: Merchandising Operations&R&"Arial,Bold"&10Page &P of &N

Ethical Issue 5-1

Ethical Issue 5-1
	Requirements
	1.	Under Dobbs’ FOB policy, when should the company record a sale?
	2.	Do you approve or disapprove of Dobbs’ manner of deciding when to ship
		goods to customers and record the sales revenue? If you approve, give your
		reason. If you disapprove, identify a better way to decide when to ship goods.
		(There is no accounting rule against Dobbs’ practice.)
Solution:
	Requirement 1
	Requirement 2

&L&"Arial,Bold"&12HORNGREN's ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 5: Merchandising Operations&R&"Arial,Bold"&10Page &P of &N

E6-20

E6-20
	Requirements
	1.	Compute cost of goods sold and gross profit using the FIFO inventory costing method.
	2.	Compute cost of goods sold and gross profit using the LIFO inventory costing method.
	3.	Compute cost of goods sold and gross profit using the weighted-average inventory costing method. (Round weighted average cost per unit to the nearest cent and all other amounts to the nearest dollar.)
	4.	Which method results in the largest gross profit and why?
Solution:
	Requirement 1
	Calculations:
		Purchases			Cost of Goods Sold			Inventory on Hand
	Date	Quantity	Unit	Total Cost	Quantity	Unit	Total Cost	Quantity	Unit	Total Cost
			Cost			Cost			Cost
	Requirement 2
		Purchases			Cost of Goods Sold			Inventory on Hand
	Date	Quantity	Unit Cost		Quantity	Unit Cost	Total Cost	Quantity	Unit Cost	Total Cost
				Total Cost
	Requirement 3
		Purchases			Cost of Goods Sold			Inventory on Hand
			Unit			Unit	Total Cost		Unit	Total Cost
	Date	Quantity	Cost	Total Cost	Quantity	Cost		Quantity	Cost
	Requirement 4

&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 6: Merchandise Inventory&R&"Arial,Bold"&10Page &P of &N

E6-22

E6-22
	Requirements
	1.	Journalize the adjusting entry for merchandise inventory, if any is required.
	2.	Prepare a revised partial income statement to show how Nutritional Foods should report sales, cost of goods sold, and gross profit.
Solution:
	Requirement 1
		Date	Accounts and Explanation	Debit	Credit
	Requirement 2
		NUTRITIONAL FOODS
		Income Statement (Partial)
		Year Ended March 31, 2017

&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 6: Merchandise Inventory&R&"Arial,Bold"&10Page &P of &N

P6-30A

P6-30A
	Requirements
	1.	Journalize any required entries.
	2.	At what amount should the company report merchandise inventory on the balance sheet?
	3.	At what amount should the company report cost of goods sold on the income statement?
	4.	Which accounting principle or concept is most relevant to this situation?
Solution:
	Requirement 1
		Date	Accounts and Explanation	Debit	Credit
	Requirement 2
	Requirement 3
	Requirement 4

&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 6: Merchandise Inventory&R&"Arial,Bold"&10Page &P of &N

P6-31A

P6-31A
	Requirements
	1.	Prepare corrected income statements for the three years.
	2.	State whether each year’s net income—before your corrections—is understated or overstated, and indicate the amount of the understatement or overstatement.
	3.	Compute the inventory turnover and days’ sales in inventory using the corrected income statements for the three years. (Round all numbers to two decimals.)
Solution:
	Requirement 1
	LAKE AIR CARPETS
	Income Statements
	Years Ended December 30, 2015 ,2014, and 2013
			2017	2016	2015
	Requirement 2
	Requirement 3

&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 6: Merchandise Inventory&R&"Arial,Bold"&10Page &P of &N

P7-25A

P7-25A
	Requirements
	1.	Sparkling Lake Golf Shop records purchase returns in the general journal. Use the appropriate journal to record the transactions in a purchases journal, a cash payments journal (omit the Check No. column), and a general journal. The company uses the perpetual inventory system.
	2.	Total each column of the special journals. Show that total debits equal total credits in each special journal.
	3.	Show how postings would be made from the journals by writing the account numbers and check marks in the appropriate places in the journals.
Solution:
	Requirements 1, 2 and 3
	Purchases Journal								Page 1
	Date	Vendor Account Credited		Post. Ref.
			Terms
	2016
	Cash Payments Journal							Page 1
	Date	Ck. No.	Account Debited		Post. Ref.
	2016
	Date	Accounts and Explanation				Post. Ref.	Debit	Credit

&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"Chapter 7: Accounting Information Systems&R&"Arial,Bold"Page &P of &N

P7-26A

P7-26A
	Requirements
	1.	Open four-column general ledger accounts using Oxford’s account numbers
		and balances as of May 1, 2016 that follow. All accounts have normal balances.
	2.	Open four-column accounts in the subsidiary ledgers with beginning balance as of May 1, if any: Accounts receivable ledger—Backus Co., $1,400; Burleson Co., $0; M. O. Samson, $0; and K. D. FKerwin, $0. Accounts payable ledger—Habile Co., $0; Marszalek, Inc., $0; Saari Distributing, $0; Weaver Co., $1,000.
	3.	Enter the transactions in a sales journal (page 7), a cash receipts journal (page 5), a purchases journal (page 10), a cash payments journal (page 8), and a general journal (page 6), as appropriate.
	4.	Post daily to the accounts receivable subsidiary ledger and to the accounts payable subsidiary ledger.
	5.	Total each column of the special journals. Show that total debits equal total credits in each special journal. On May 31, post to the general ledger.
	6.	Prepare a trial balance as of May 31, 2016, to verify the equality of the general ledger. Balance the total of the customer balances in the accounts receivable subsidiary ledger against Accounts Receivable in the general ledger. Do the same for the accounts payable subsidiary ledger and Accounts Payable in the general ledger.
Solution:
	Requirements 1 and 5
	Cash						No. 111
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Accounts Receivable						No. 112
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Merchandise Inventory						No. 114
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Office Supplies						No. 116
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Prepaid Insurance						No. 117
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Furniture						No. 151
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Accounts Payable						No. 211
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Oxford, Capital						No. 311
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Sales Revenue						No. 411
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Sales Discounts						No. 412
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Sales Returns and Allowances						No. 413
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Interest Revenue						No. 419
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Cost of Goods Sold						No. 511
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Salaries Expense						No. 531
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Utilities Expense						No. 541
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Requirements 2 and 4
	Accounts Receivable—Backus Co.
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Accounts Receivable—Burleson Co.
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Accounts Receivable—M. O. Samson
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Accounts Receivable—K. D. Kerwin
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Accounts Payable—Habile Co.
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Accounts Payable—Marzalek, Inc.
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Accounts Payable—Saari Distributing
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Accounts Payable—Weaver Co.
	Date		Post. Ref.	Debit	Credit	Balance
						Debit	Credit
	Requirements 3, 4, 5 and 6
	Sales Journal								Page 7
	Date		Invoice No.	Customer Account Debited		Post. Ref.
	Cash Receipts Journal								Page 5
	Date	Account Credited	Post. Ref.
	Purchases Journal									Page 10
	Date	Vendor Account Credited	Terms	Post. Ref.
	Cash Payments Journal								Page 8
	Date	Ck. No.	Account Debited
	General Journal								Page 6
	Date	Accounts and Explanation					Post. Ref.	Debit	Credit
	Requirement 6
	OXFORD COMPUTER SECURITY
	Trial Balance
	May 31, 2016
	Acct. No.		Account Name						Debit	Credit
	Accounts Receivable Subsidiary Ledger
	Customer					Balance
	Accounts Payable Subsidiary Ledger
	Vendor					Balance

&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"Chapter 7: Accounting Information Systems&R&"Arial,Bold"Page &P of &N

Communication Activity 7-1

Communication Activity 7-1
	In 150 words or fewer, explain what an accounting information system is and
	describe an effective system.
Solution:

&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"Chapter 7: Accounting Information Systems&R&"Arial,Bold"Page &P of &N

S8-10

S8-10
	Compute the cash ratio for Budget Banners.
Solution:

&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 8: Internal Control and Cash&R&"Arial,Bold"&10Page &P of &N

P8-30B

P8-30B
	Requirements
	1.	On September 30, how much cash should the petty cash fund hold before it is replenished?
	2.	Journalize all required entries to (a) create the fund and (b) replenish it. Include explanations.
	3.	Make the entry on October 1 to increase the fund balance to $525. Include an explanation.
Solution:
	Requirement 1
	Requirement 2
	Date		Accounts and Explanation	Debit	Credit
	Requirement 3
	Date		Accounts and Explanation	Debit	Credit

&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 8: Internal Control and Cash&R&"Arial,Bold"&10Page &P of &N

P8-32B

P8-32B
	Requirements
	1.	Prepare the bank reconciliation for Wollaston’s Healthcare at October 31, 2016.
	2.	Journalize any required entries from the bank reconciliation. Include an explanation for each entry.
Solution:
	Requirement 1
	WOLLASTON'S HEALTH CARE
	Bank Reconciliation
	October 31, 2016
	BANK			BOOK
	Requirement 2
	Date		Accounts and Explanation		Debit	Credit

&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 8: Internal Control and Cash&R&"Arial,Bold"&10Page &P of &N

P8-33

P8-33
	Requirements
	1.	Prepare the March bank reconciliation.
	2.	Journalize any transactions required from the bank reconciliation. Compute the adjusted account balance for the Cash T-account, and denote the balance as End. Bal.
Solution:
	Requirement 1
	DANIELS CONSULTING
	Bank Reconciliation
	March 31, 2017
	BANK			BOOK
	Requirement 2
	Date		Accounts and Explanation		Debit	Credit
	Cash

&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 8: Internal Control and Cash&R&"Arial,Bold"&10Page &P of &N

Decision Case 8-2

Decision Case 8-2
	Requirements
	1.	Describe in detail the main internal control weakness in this situation. Specify what negative result(s) could occur because of the internal control weakness.
	2.	Describe what you would do to correct the internal control weakness.
Solution:
	Requirement 1
	Requirement 2

&L&"Arial,Bold"&12HORNGREN'S ACCOUNTING - Eleventh Edition

&L&"Arial,Bold"&10Chapter 8: Internal Control and Cash&R&"Arial,Bold"&10Page &P of &N