chapter 5 & 6

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Journalize entries for the following related transactions of South Coast Heating & Air Company. Refer to the Chart of Accounts for exact wording of account titles.

Mar.	1	Purchased $51,300 of merchandise from Atlas Co. on account, terms 1/10, n/30.
	9	Paid the amount owed on the invoice within the discount period.
	11	Discovered that $7,300 of the merchandise purchases on Mar. 1 was defective and returned items, receiving credit.
	18	Purchased $6,200 of merchandise from Atlas Co. on account, terms n/30.
	20	Received a refund from Atlas Co. for return on Mar. 11 less the purchase on Mar. 18.

CHART OF ACCOUNTS

South Coast Heating & Air Company

General Ledger

	ASSETS
110	Cash
120	Accounts Receivable
125	Notes Receivable
130	Merchandise Inventory
140	Office Supplies
141	Store Supplies
142	Prepaid Insurance
180	Land
192	Store Equipment
193	Accumulated Depreciation-Store Equipment
194	Office Equipment
195	Accumulated Depreciation-Office Equipment
	LIABILITIES
211	Accounts Payable-Atlas Co.
218	Sales Tax Payable
219	Customers Refunds Payable
220	Unearned Rent
221	Notes Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Rent Revenue
	EXPENSES
501	Cost of Merchandise Sold
521	Delivery Expense
522	Advertising Expense
524	Depreciation Expense-Store Equipment
525	Depreciation Expense-Office Equipment
531	Rent Expense
533	Insurance Expense
534	Store Supplies Expense
535	Office Supplies Expense
536	Credit Card Expense
539	Miscellaneous Expense
710	Interest Expense

Journalize entries for the related March transactions of South Coast Heating & Air Company. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10

ournalize the entries to record the following selected transactions. Refer to the Chart of Accounts for exact wording of account titles.

Mar.	1	Sold $61,700 of merchandise on account, subject to a sales tax of 6%. The cost of the merchandise sold was $38,720.
	23	Paid $40,670 to the state sales tax department for taxes collected.

CHART OF ACCOUNTS

General Ledger

	ASSETS
110	Cash
120	Accounts Receivable
125	Notes Receivable
130	Merchandise Inventory
131	Estimated Returns Inventory
140	Office Supplies
141	Store Supplies
142	Prepaid Insurance
180	Land
192	Store Equipment
193	Accumulated Depreciation-Store Equipment
194	Office Equipment
195	Accumulated Depreciation-Office Equipment
	LIABILITIES
210	Accounts Payable
216	Salaries Payable
218	Sales Tax Payable
219	Customers Refunds Payable
220	Unearned Rent
221	Notes Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Rent Revenue
	EXPENSES
510	Cost of Merchandise Sold
521	Delivery Expense
522	Advertising Expense
524	Depreciation Expense-Store Equipment
525	Depreciation Expense-Office Equipment
526	Salaries Expense
531	Rent Expense
533	Insurance Expense
534	Store Supplies Expense
535	Office Supplies Expense
536	Credit Card Expense
539	Miscellaneous Expense
710	Interest Expense

Journalize the entries to record the selected March transactions. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7

On October 31, 2016, the balances of the accounts appearing in the ledger of Prestige Furnishings Company, a furniture wholesaler, are as follows:

Accumulated Depreciation-Building	$746,350
Administrative Expenses	515,750
Building	2,419,500
Cash	168,150
Cost of Merchandise Sold	3,900,350
Interest Expense	9,750
Jan Brown, Capital	1,585,350
Jan Brown, Drawing	180,400
Merchandise Inventory	941,750
Notes Payable	261,150
Office Supplies	21,000
Salaries Payable	7,850
Sales	6,627,450
Selling Expenses	710,900
Store Supplies	93,650
	Required:
a.	Prepare a multiple-step income statement for the year ended October 31, 2016. Be sure to complete the heading of the statement. Refer to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. In the Other income and expenses section only, enter amounts that represent other expenses as negative numbers using a minus sign.
b.	What is a major advantage of the multiple-step income statement over the single-step income statement?

Labels
For the Year Ended October 31, 2016
October 31, 2016
Operating expenses
Other income and expense
Amount Descriptions
Gross profit
Income from operations
Net income
Net loss
Total assets
Total liabilities
Total operating expenses
Total owner’s equity

Prepare a multiple-step income statement for the year ended October 31, 2016. Be sure to complete the heading of the statement. Refer to the information given in the exercise and to the list of Labels and Amount Descriptions provided for the exact wording of the answer choices for text entries. A colon (:) will automatically appear if it is required. In the Other income and expenses section only, enter amounts that represent other expenses as negative numbers using a minus sign.

Prestige Furnishings Company

Income Statement


1
2
3
4
5
6
7
8
9
10
11

What is a major advantage of the multiple-step income statement over the single-step income statement?

The multiple-step income statement clearly presents the value of total revenues.

The multiple-step income statement is less complex to prepare.

The multiple-step income statement shows the relationship of gross profit to sales.

The multiple-step income statement clearly presents the value of total expenses.

Freight Terms

Determine the amount to be paid in full settlement of each of two invoices (a) and (b), assuming that credit for returns and allowances was received prior to payment and that all invoices were paid within the discount period. If required, round the answers to the nearest dollar.

	Merchandise	Freight Paid by Seller	Freight Terms	Returns and Allowances
a.	$8,400		$600		FOB shipping point, 1/10, n/30	$1,400
b.	4,550		600		FOB destination, 2/10, n/30	850

a.	$
b.	$

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