ACCT 2301 EXAM 3 Chapters 5 and 6

Description

QUESTION 1

1. Oceana Art Supply Company uses a perpetual inventory system. Record the following transactions during August 2019:   (12 points)

 

Aug. 5:   Purchased $4,900 of merchandise on account. Freight and credit terms were FOB shipping point, 3/15, n/60.

 

Aug. 9:   Paid transportation costs of $440 for the Aug. 5 purchase.

 

Aug 10:  Sold $8,000 of merchandise on account to Tipsy Art, credit terms 2/10, n/30.  Cost of goods sold is $5,000.

 

Aug. 10: Returned $900 of defective merchandise that had been purchased on Aug. 5.

 

Aug. 15: Received payment from Tipsy (within the discount period).

 

Aug 17:  Paid (within the discount period) for the merchandise purchased on Aug. 5. (Don’t forget that some was returned!)

 

 

QUESTION 2

1. The balances of the accounts appearing in the ledger of Oceana Art Supply are listed below in the Adjusted Trial Balance for the year ending December 31, 2018.  Create a Multi-Step Income Statement in good form for the company for the year 2018. (20 Points.)

 

Oceana Art Supply Adjusted Trial Balance December 31, 2018
	Debit	Credit
Cash	$12,600
Accounts Receivable	2,400
Prepaid Rent	800
Merchandise Inventory	30,000
Accounts Payable		$4,200
Salaries Payable		1,000
Notes Payable		800
Common Stock		10,000
Retained Earnings		8,120
Dividends	1,000
Sales Revenue		81,800
Sales Discounts Forfeited		530
Interest Revenue		250
Cost of Goods Sold	21,000
Salaries Expense (Admin Exp)	15,000
Rent Expense (Admin Exp)	9,000
Selling Expense (Selling Exp)	8,500
Supplies Expense (Selling Exp)	500
Income Tax Expense	5,900
Total	$106,700	$106,700

 

 

QUESTION 3

1. Modern Décor Furniture began June with merchandise inventory of 30 sofas that cost a total of $18,000.  During the month, Modern Décor purchased and sold merchandise on account as follows:

 

June 1	Balance	30 sofas @ $600 each
June 7	Purchase	20 sofas @ $650 each
14	Sale	30 sofas @ $1,000 each
18	Purchase	35 sofas @ $675 each
27	Sale	35 sofas @ $1,200 each

 

Prepare a perpetual inventory record, using the FIFO and LIFO inventory costing method, and determine the company’s cost of goods sold, ending merchandise inventory, and gross profit.