College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
expand_more
expand_more
format_list_bulleted
Concept explainers
Textbook Question
Chapter 14, Problem 1MYW
A friend of yours recently opened Abracadabra, a sportswear shop specializing in monogrammed athletic gear. Most merchandise is special ordered for customers. However, a small inventory is on hand. Your friend does not understand why a physical inventory is necessary before preparing the financial statements. She knows how much she paid for all merchandise purchased. Why not simply use this amount for cost of goods sold? After all, it has been paid for. Write a brief memo explaining the purpose of the physical inventory and why she should not use the cost of purchases as cost of goods sold.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Imagine you have taken a once-prized and valuable possession to a consignment store. You tell the clerk that you will not accept less than $200 for it. What are some steps the store might take to price the item? Create a plan for initial pricing and clearance discounting. Why is it important for the consignment shop to have a plan?
List the steps the clerk might take to price the itemCreate a plan for initial pricingCreate a plan for clearance discountingExplain why this is important
Your friend, Wendy Geiger, owns a small retail store that sells candies and nuts. Geiger acquires her goods from a few select vendors. She generally makes purchase orders by phone and on credit. Sales are primarily for cash. Geiger keeps her own manual accounting system using a general journal and a general ledger. At the end of each business day, she records one summary entry for cash sales. Geiger recently began offering items in creative gift packages. This has increased sales substantially, and she is now receiving orders from corporate and other clients who order large quantities and prefer to buy on credit. As a result of increased credit transactions in both purchases and sales, keeping the accounting records has become extremely time- consuming. Geiger wants to continue to maintain her own manual system and calls you for advice. Write a memo to her advising how she might modify her current manual accounting system to accommodate the expanded business activities. Geiger is…
Required
1. Assume that Urban One sells a $300 gift certificate to a customer, collecting the $300 cash in advance.
Prepare the journal entry for (a) collection of the cash for delivery of the gift certificate to the customer and
(b) revenue from the subsequent delivery of merchandise when the gift certificate is used.
2. How can keeping less inventory help to improve Urban One's profit margin?
3. Cathy Hughes understands that many companies carry considerable inventory, and she is thinking of
carrying additional inventory of merchandise for sale. Cathy desires your advice on the pros and cons of
carrying such inventory. Provide at least one reason for, and one reason against, carrying additional
inventory.
Chapter 14 Solutions
College Accounting, Chapters 1-27
Ch. 14 - Under the periodic inventory system, the beginning...Ch. 14 - Under the periodic inventory system, the ending...Ch. 14 - The cash received in advance before delivering a...Ch. 14 - Unearned revenue is adjusted into an expense...Ch. 14 - Sales Returns and Allowances is classified as a...Ch. 14 - Under the periodic inventory system, what account...Ch. 14 - Under the periodic inventory system, what account...Ch. 14 - Under the periodic inventory system, what account...Ch. 14 - Unearned revenue is classified as what type of...Ch. 14 - Under the perpetual inventory method, what account...
Ch. 14 - Prepare the cost of goods sold section for Josephs...Ch. 14 - The Venice Theatre sold and collected cash of...Ch. 14 - Information relating to inventory for Janie Par...Ch. 14 - Using the spreadsheet provided below, prepare the...Ch. 14 - Prob. 5CECh. 14 - A firm is preparing to make adjusting entries at...Ch. 14 - What spreadsheet amounts are used to compute cost...Ch. 14 - Why are both the debit and credit amounts in the...Ch. 14 - What is an unearned revenue?Ch. 14 - Give three examples of unearned revenue.Ch. 14 - Prob. 6RQCh. 14 - Prob. 7RQCh. 14 - A firm is preparing to make adjusting entries at...Ch. 14 - ADJUSTMENT FOR MERCHANDISE INVENTORY USING T...Ch. 14 - ADJUSTMENT FOR MERCHANDISE INVENTORY USING T...Ch. 14 - CALCULATION OF COST OF GOODS SOLD: PERIODIC...Ch. 14 - CALCULATION OF COST OF GOODS SOLD: PERIODIC...Ch. 14 - ADJUSTMENT FOR UNEARNED REVENUES USING T ACCOUNTS...Ch. 14 - MERCHANDISE INVENTORY ADJUSTMENTS: PERIODIC...Ch. 14 - DETERMINING THE BEGINNING AND ENDING INVENTORY...Ch. 14 - JOURNALIZE ADJUSTING ENTRIES FOR A MERCHANDISING...Ch. 14 - JOURNAL ENTRIES UNDER THE PERPETUAL INVENTORY...Ch. 14 - ADJUSTMENTS FOR A MERCHANDISING BUSINESS:...Ch. 14 - JOURNALIZE ADJUSTING ENTRY FOR INVENTORY...Ch. 14 - PREPARATION OF ADJUSTMENTS ON A SPREADSHEET FOR A...Ch. 14 - WORKING BACKWARD FROM ADJUSTED TRIAL BALANCE TO...Ch. 14 - ADJUSTMENT FOR MERCHANDISE INVENTORY USING T...Ch. 14 - ADJUSTMENT FOR MERCHANDISE INVENTORY USING T...Ch. 14 - CALCULATION OF COST OF GOODS SOLD: PERIODIC...Ch. 14 - CALCULATION OF COST OF GOODS SOLD: PERIODIC...Ch. 14 - ADJUSTMENT FOR UNEARNED REVENUES USING T ACCOUNTS...Ch. 14 - MERCHANDISE INVENTORY ADJUSTMENTS: PERIODIC...Ch. 14 - DETERMINING THE BEGINNING AND ENDING INVENTORY...Ch. 14 - JOURNALIZE ADJUSTING ENTRIES FOR A MERCHANDISING...Ch. 14 - JOURNAL ENTRIES UNDER THE PERPETUAL INVENTORY...Ch. 14 - ADJUSTMENTS FOR A MERCHANDISING BUSINESS:...Ch. 14 - JOURNALIZE ADJUSTING ENTRY FOR INVENTORY...Ch. 14 - Prob. 12SPBCh. 14 - WORKING BACKWARD FROM ADJUSTED TRIAL BALANCE TO...Ch. 14 - A friend of yours recently opened Abracadabra, a...Ch. 14 - Jason Tierro, an inventory clerk at Lexmar...Ch. 14 - John Neff owns and operates Waikiki Surf Shop. A...Ch. 14 - Block Foods, a retail grocery store, has agreed to...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- You are the financial officer for Music Plus, a retailer that sells goods for home entertainment needs. The business owner, Vic Velakturi, recently reviewed the annual financial statements you prepared and sent you an e-mail stating that he thinks you overstated net income. He explains that although he has invested a great deal in security, he is sure shoplifting and other forms of inventory shrinkage have occurred, but he does not see any deduction for shrinkage on the income statement. The store uses a perpetual inventory system. Required Prepare a brief memorandum that responds to the owner’s concerns.arrow_forwardSome business transactions purchase goods and services from the seller, on credit. The buyer of these goods and services, in good faith, intends to pay for the merchandise acquired or services rendered, on time. However, the seller knowing this is not always possible, will provide an incentive to the buyer. After reading “Purchase of Merchandise on Account”, page 146 to 148, illustrate and explain the ‘incentive’ a buyer receives to pay his bill.arrow_forwardIn each of the following situations, indicate whether you would expect the business to use a peri- odic inventory system or a perpetual inventory system. Explain the reasons for your answer. a. The Frontier Shop is a small retail store that sells boots and Western clothing. The store is operated by the owner, who works full-time in the business, and by one part-time salesclerk. Sales transactions are recorded on an antique cash register. The business uses a manual ac- counting system, which is maintained by ACE Bookkeeping Service. At the end of each month, an employee of ACE visits The Frontier Shop to update its accounting records, prepare sales tax returns, and perform other necessary accounting services. b. Allister’s Corner is an art gallery in the Soho district of New York. All accounting records are maintained manually by the owner, who works in the store on a full-time basis. The store sells P Jan. 5 Jan. 10 Purchased 60 machines from Double, Inc. The total cost of these…arrow_forward
- Suppose you are being interviewed for a bookkeeping job for a retailer that uses a perpetual inventory system. The employer feels that the only way to determine whether or not the person being interviewed actually understands how to record transactions, is to ask them to provide an example showing the accounts (no amounts necessary) that would be debited and credited for the following: Purchase merchandise inventory on account. Sale of goods on account Return of part of the merchandise purchased in 1. above to the supplier. Payment to supplier, taking advantage of the discount that was offered. Return of goods by customer for credit. Payment received from customer, taking advantage of discount that was offered.arrow_forwardConsider the following statements as you answer the next question: i. Felix, a cash receipts clerk, applied Allison's payment to the invoices indicated on her remittance advice. ii. In purchasing books, Allison filled out a form on a bookstore's web site. iii. The bookstore's web site verified Allison's credit limit. iv. William, a warehouse worker, prepared Allison's books for shipment. All of the following steps in the sales / collection process are represented in the four statements except: A. The first step. B. The second step. C. The sixth step. D. The last step.arrow_forwardPlease help me to solve this problemarrow_forward
- Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardThe Vespa store would record the following journal entries (debits and credits) to recognize the revenue and reduce their inventory when they sell a scooter for cash - hint: remember the "2 step" (Select ALL that apply): O Credit Cost of Goods Sold O Credit Revenue O Credit Inventory O Debit Deferred Revenue O Credit Cash O Debit Revenue O Debit Cash O Debit Cost of Goods Sold O Debit to Inventory O Credit Deferred Revenuc ASUS f3 f4 f5 f6 [X f7 f8 f9 f10 f11 2$ 3 & 7 8 因 近 图arrow_forwardAn unhappy customer just returned $50 of the items he purchased yesterday when he charged the goods to the companys store credit card. Which special journal would the company use to record this transaction? A. sales journal B. purchases journal C. cash receipts journal D. cash disbursements journal E. general journalarrow_forward
- Hardcase Luggage Shop is a small retail establishment located in a large shopping mall. This shop has implemented the following procedures regarding inventory items:a. Because the shop carries mostly high-quality, designer luggage, all inventory items are tagged with a control device that activates an alarm if a tagged item is removed from the store.b. Because the display area of the store is limited, only a sample of each piece of luggage is kept on the selling floor. Whenever a customer selects a piece of luggage, the salesclerk gets the appropriate piece from the store’s stockroom. Because all salesclerks need access to the stockroom, it is not locked. The stockroom is adjacent to the break room used by all mall employees.c. Whenever Hardcase Luggage Shop receives a shipment of new inventory, the items are taken directly to the stockroom. Hardcase’s accountant uses the vendor’s invoice to record the amount of inventory received.State whether each of these procedures is appropriate…arrow_forwardIf you are a jewelry store, what inventory system is applicable to you? How about for a hardware store? Explain your answers.arrow_forwardIn a system like QuickBooks Online, when should you create an invoice? a. When a customer purchases goods or services and pays you in cash at the time of the sale b. When a customer purchases goods or services but does not pay you at the time of the sale c. When a customer purchases goods or services and pays you by check or credit card at the time of the sale d. When a customer purchases goods or services, but you don't want to record the sale as finalarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENTPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengageFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Chapter 6 Merchandise Inventory; Author: Vicki Stewart;https://www.youtube.com/watch?v=DnrcQLD2yKU;License: Standard YouTube License, CC-BY
Accounting for Merchandising Operations Recording Purchases of Merchandise; Author: Socrat Ghadban;https://www.youtube.com/watch?v=iQp5UoYpG20;License: Standard Youtube License