Chapter 5 - In Class Demo Questions - W2023

docx

School

Toronto Metropolitan University *

*We aren’t endorsed by this school

Course

100

Subject

Accounting

Date

Apr 3, 2024

Type

docx

Pages

Uploaded by ProfessorBaboonPerson1035

In Class Demo Questions ICDQ5-1 During April the following transactions occurred for Holling Inc., a wholesaler that sells clothing to other retailers. Record each of the transactions into the expanded accounting equation using account names. Date Description Amount April 1 Purchase inventory from Roberts Inc., terms 2/10, n/30, F.O.B. shipping point. Acting as the buyer Inventory, accounts payable go up^ $7,900 April 3 The appropriate party paid shipping costs on the purchase from Roberts Inc. $120 April 7 Returned inventory that was the wrong colour to Roberts Inc. $1,000 April 11 Paid Roberts Inc. for the outstanding amount. ?? April 13 Purchased inventory from Niki Inc. for cash. Shipping terms were F.O.B. destination. $920 April 16 The appropriate party paid shipping costs on the purchase from Niki Inc. $15 April 17 Purchased and picked up supplies from Discount Supplies Inc. for cash. $1,300 April 18 Received a cash refund from Niki Sports for a return. The return was due to inventory that was damaged in transit. $110 April 20 Sold inventory to a customer, Groud Inc., on account, credit terms of 1/10, n/30, shipping terms F.O.B. destination. Now acting as the seller $6,800 April 20 The cost of the inventory sold to Groud Inc. $4,080 April 21 The appropriate party paid shipping costs. Shipper Pays – this is us cause fob destination $100 April 22 Some of the inventory sold to Groud Inc. was returned because it was the wrong model. This is the selling price of the returned inventory. $1,000 April 22 The cost of the inventory returned by Groud Inc. $600 April 23 Sold inventory to another customer, Janison Ltd., credit terms 1/10, n/30, shipping terms F.O.B. shipping point. $5,600 April 23 The cost of the inventory sold to Janison Ltd. $3,360 April 24 The appropriate party paid shipping costs. $85 April 25 Received payment from Groud Inc. – remember seller hat therefore sales discount ?? May 4 Received payment from Janison Ltd. ?? The chart is provided for you on the next page.

Date Assets Liabs. Equity Owner' s Capital Retained Earnings Profit Revenue Expenses Cash Inventory supplies Accounts receivable Accounts Payable Owner's Capital Retained Earnings Sales Revenue Sales Returns and allowances Sales discounts Cost of goods sold Freight Out April 1 7900 7900 April 3 -120 120 (because you are the buyer) April 7 -1000 -1000 April 11 -6762 (7900-1000= 6900*2%=138 6900-138=) -138 (7900- 1000= 6900*2%) -6900 April 13 -920 920 April 16 - - - - - - - - - - - - - - April 17 -1300 1300 April 18 110 -110 April 20 6800 6800 April 20 -4080 4080 April 21 -100 100 April 22 -1000 -1000 April 22 600 -600 April 23 5600 5600 April 23 -3360 3360 April 24 - - - - - - - - - - - - - -

April 25 5742 -5800 -58 May 4 5600 -5600 TOTALS -9092 852 1300 11400 - 0 - - 12400 -1000 -58 6840 100

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

ICDQ5-2 In April of Year 1 you start Cooper Hardware, selling specialized tools over the internet. In your first month of operations you have the following transactions. Record each of the transactions into the expanded accounting equation using account names. Be sure to apply the knowledge not only from this chapter but from prior chapters. April date Description: 1 Contributed cash of $40,000 to start the business. 2 Registered a company name with Service Ontario, $60, paying by credit card. 4 Purchased office supplies, $800, plus HST, using a business credit card. 6 Purchased a 1-year general liability insurance policy for $1,800, plus 8% sales tax, using cash. 8 Set up a website with online order ability using a free web server. 9 Purchased specialized tools from BBA Inc. for inventory costing $23,400 (all taxes included), credit terms 2/15, n/45, shipping terms F.O.B. shipping point. We are the buyer since shipping point, we have to pay shipping 10 The appropriate party paid shipping costs of $1,100 (taxes included). 12 Sold $14,575 of your tools inventory to Edmonton Hardware for $26,500. Credit terms: 3/10, n/20. Shipping terms F.O.B. destination. We are the seller since destination, we have to pay shipping 13 The appropriate party paid shipping costs of $690 (taxes included). 16 Paid for the tools inventory purchased from BBA Inc. 17 Edmonton Hardware has returned $5,300 of the inventory because they decided they had ordered too much. They return the inventory within the allowed return period F.O.B. Destination. The cost of the inventory was $2,915. 21 Edmonton Hardware pays their outstanding account balance. 24 Purchased tools from Newfoundland Tools for $9,250. Credit terms: 1/5, n/15. Shipping terms F.O.B. destination. 25 The appropriate party paid freight costs of $580 in cash (taxes included). – seller has to pay cause fob destination 27 Returned half of the inventory you purchased to Newfoundland Tools as the tools were defective, shipped F.O.B. shipping point. 30 Paid for the tools inventory purchased from Newfoundland Tools. 30 Counted the office supplies and had only $225 of supplies left on hand. The remainder had been used. 30 Used up 1 month of insurance, $162 ($1,800 * 1.08 / 12 months). 30 Paid the credit card bill for all outstanding business charges. The chart is provided for you on the next page.

DATE Assets Liabs. Equity Owner' s Capital Retained Earnings Profit Revenue Expenses Cash Business license Office Supplies Prepaid Insurance Inventory Accounts receivable Accounts Payable Owner's Capital Retained Earnings Sales Revenue Sales Returns and Allowances Sales Discounts Costs of goods sold Freight Out Supplies expense Insurance OPENING BALANCE 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 April 1 40000 40000 April 2 60 60 April 4 904 904 April 6 -1944 1944 April 8 - - - - - - - - - - - - - - - - April 9 23400 23400 April 10 -1100 1100 April 12 -14575 26500 26500 14575 April 13 -690 690 April 16 -22932 -468 -23400 April 17 2915 -5300 -5300 -2915 April 21 20564 -21200 -636 April 24 9250 9250 April 25 - - - - - - - - - - - - - - - - April 27 -4625 -4625 April 30 -4625 -4625 April 30 -679 679 April 30 -162 162 April 30 -964 -964

TOTALS

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Was the business profitable? What is the business's gross profit? What is its gross profit ratio? What is its overall profit margin? Would you consider this new business successful for the month of April? What is its financial position? Cooper Hardward Income Statement Month Ending April 30, Year 1 $ $ Sales 26500 Less: returns and allowances -5300 Less: Discounts -636 Net Sales 20564 Cost of Goods Sold -11660 Gross Profit 8904 Operating Expenses Freight out 690 Supplies 679 Insurance 162 Total Operating Expenses 1531 Net Income before tax 7373 Income Tax 0 Net Income 7373 Gross Profit ratio = 43.30% Profit Margin = 35.85%

ICDQ5-3 Pear Ltd. has the following transactions during the month of October, Year 1. Date Transaction description Amount Opening balances Cash $4,289; Inventory $8,250; Office Supplies $90; Owner’s Capital $10,000; Retained Earnings $2,629. Oct. 2 You renew your lease for 1 year and paid 4 months of rent, including October. Cash down, prepaid rent up $2,800 Oct. 6 Sold inventory to Dyson Inc. Credit terms were n/30, shipping terms were F.O.B. destination point. Sales revenue up, accounts receivable up $1,800 Oct. 6 The cost of the inventory sold to Dyson Inc. Inventory down, cost of goods sold up $900 Oct. 7 The appropriate party paid freight costs to ShipCheep Inc. Cash down, Freight out up $80 Oct. 9 Dyson Inc. returns one third (1/3) of the inventory sold to them because it was the wrong colour, an error made by you, the supplier. (HINT: 2 entries are required!) Accounts receivable down, sales returns and allowances up, inventory up, cost of goods sold down ?? Oct. 10 Pear Ltd. pays the return shipping costs for the return of inventory from Dyson Inc. Cash down, freight out up $50 Oct. 12 Sold inventory to A.B. Inc. on account, credit terms 2/10, n/30, shipping terms F.O.B. destination. Accounts receivable up, sales revenue up, inventory down, cost of goods sold up $2,500 Oct. 12 The cost of the inventory sold to A.B. Inc. Inventory down, cost of goods sold up $1,500 Oct. 13 The appropriate party paid freight costs to ShipCheep Inc. Cash down, freight up $150 Oct. 15 Purchased office supplies for cash. Cash down, supplies up $225 Oct. 19 A.B. Inc. discovers that some of the inventory was damaged in transit. It will not be saleable due to its damaged condition. Accounts receivable down, sales returns up $1,000 Oct. 19 The cost of the inventory returned from A.B. Inc. (HINT: think about the fact that the inventory is not saleable!!) No inventory change $600 Oct. 20 The appropriate company pays the return shipping costs for the return of inventory on October 19. The shipping company was again ShipCheep Inc. $60 Oct. 21 A.B. Inc. pays its outstanding accounts receivable balance. ??

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Oct. 28 Paid for the utilities (heat, hydro, water) for the month of October. $289 Oct. 31 Received the cell phone bill for the use of the cell phone in October. Pear Ltd. will pay the telephone bill on November 8. (HINT: think about the word USE and what that means regarding the elements and recording the transaction!) $210 Oct. 31 Record the rent expense for the use of the space for the last month. ?? Oct. 31 Determined that the amount of supplies that were remaining at the end of the month was $140. (HINT: what do YOU have to record?) $140 Required: Record the transactions into the expanded accounting equation using account names. The chart is available – just flip a few pages to see it. NOTE: The account names have been provided for you for this question; however, account names will NOT be provided for you in the midterm. You will have to develop the account names yourself! NOTE: October is Pear Ltd.'s first month of the current year; therefore, their balance sheet accounts have balances but all the income statement and dividend accounts are ZERO. You have been given the business's opening balances so you can prepare the financial statements and answer the additional questions which follow the chart. HINT: closing balances have been given to you in the chart so that you can check your ending balances against ones provided. If yours match the ones provided, your entries are probably correct!!

Assets Liabs. Equity Owner's Capital Retained Earnings Profit Revenue Expenses Cash Accounts Receivable Inventory Prepaid Rent Office Supplies Accounts Payable Owner's Capital Retained Earnings Sales Revenue Sales discounts Sales Returns & Allowances Cost of Goods Sold Supplies Rent Freight-Out Utilities Telephone Opening 4289 8250 90 10000 2629 2 6 6 7 9 9 10 12 12 13 15 18 19 19 20 21 28 31 31 31 Totals 2105 1200 6150 2100 140 210 10000 2629 4300 -30 -1600 2100 175 700 340 289 210

Provide the month end financial statements for Pear Ltd.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

What is Pear’s gross profit and gross profit ratio? Would you consider the gross profit "good"? Why or why not? Be sure to explain! Calculation of gross profit and gross profit ratio: Answer: Considering your answer to the above question, what steps would you take in order to improve the business's profitability? Review the statement and your transactions and consider only realistic alternatives. Review what happened on October 19 and 20. If you had shipped the inventory to A.B. Inc. F.O.B. Destination what would have changed? How might this affect the income statement and balance sheet? If you were shipping all your inventory F.O.B. Destination what, as a business owner, might you do and why? Continued on the next page.

Review the balance sheet. Considering that you are the owner of this business, what would concern you and why? Your statement of cash flow is provided. What would concern you and why? (Remember - you will never have to CALCULATE the numbers for the cash flow statement but you will have to create one as you did in Chapter 4 . You will also have to be able to analyze one!) Pear Ltd. Statement of Cash Flows Month ended October 31, Year 1 Operating activities: Cash received from customers $1,470 Cash paid to suppliers (3,654) Cash used in operations $(2,184) Investing activities: 0 Financing activities: 0 Net decrease in cash (2,184) Cash balance, beginning of year 4,289 Cash balance, end of year $2,105 Answer:

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version