HOSP 1210 (Financial Acct)
Learning Centre
Accounting for Merchandising
Operations: Extra Practice Problems
1. Indicate whether the following are debit or credit accounts:
c. Sales discount
a. Sales
b. Cost of goods sold
d. Sales returns and allowances
2. What is the major difference between:
a. Perpetual and Periodic inventory system, and,
b. FOB shipping point and FOB destination point?
3. Information related to Denny’s Pizzeria is presented below:
a. July 01, purchased merchandise from OK Tomato Sauce for $17,000, terms 2/10 n/30,
FOB shipping point.
b. July 05, paid $900 freight costs on merchandise bought from OK Tomato Sauce.
c. July 08, purchased equipment on account for $26,000.
d. July 09, returned damaged merchandise to OK Tomato Sauce and received a $3,000
allowance.
e. July 10, paid the amount due to OK Tomato Sauce in full.
Instructions: Prepare the journal entries to record these transactions on the books of Denny’s
Pizzeria under a perpetual inventory system.
4. Dolores Mission operates Lola’s All-Star Tennis Shop. At the beginning of the season, the
ledger of Lola’s All-Star Tennis Shop showed Cash $2,500; Merchandise Inventory $3,500
and Common Stock $6,000. The following transactions were completed during June 2009:
June 02
June 05
June 07
June 09
June 10
June 11
June 16
Purchased tennis rackets and balls on account from Noe Valley Co. for
$1,600, FOB shipping point, terms 2/10, n/60.
Paid freight on Noe Valley purchase, $80.
Received credit from Noe Valley Co. for merchandise returned, $100.
Sold merchandise on account, $1,100. Merchandise sold had a cost of
$730.
Purchased shoes, shirts and other accessories from Lombard
Sportswear, $600, terms 1/10, n/30. Payment was settled with cash
immediately.
Paid Noe Valley Co. in full.
Received cash refund of $60 from Lombard Sportswear for merchandise
returned.
Received cash of $400 for tennis shirts sold to customers.
Granted an allowance to customers for tennis shirts that did not fit, $40
June 17
June 26
Instructions:
a. Journalize the June transactions using a perpetual inventory system.
b. Enter the beginning balances in a ledger accounts and post the June transactions. (Use
J1 for the journal reference)
c. Prepare a trial balance on June 30, 2009.
© 2013 Vancouver Community College Learning Centre.
Student review only. May not be reproduced for classes.
Authored by Nabeela Rahman
Solutions
1. a. Sales: Credit
b. Cost of goods sold: Debit
c. Sales discount: Debit
d. Sales returns and allowances: Debit
2. a. The perpetual inventory system records the details of the cost of each inventory
purchase and sale. The periodic inventory system determines the cost of goods sold
only at the end of the accounting period.
b. In Free on Board (FOB) shipping point, the buyer pays the freight costs. In FOB
destination point, the seller pays the freight costs.
3.
Date
July 01
July 05
July 08
July 09
July 10
4.
Account Title & Explanation
Merchandise Inventory
Accounts Payable
Merchandise Inventory
Cash
Equipment
Accounts Payable
Accounts Payable
Merchandise Inventory
Accounts Payable
Merchandise Inventory
Cash
Debit
$17,000
Account Title & Explanation
Merchandise Inventory
Accounts Payable
Merchandise Inventory
Cash
Accounts Payable
Merchandise Inventory
Accounts Receivable
Sales
Cost of goods sold
Merchandise Inventory
Merchandise Inventory
Merchandise Inventory ($600 x 1%)
Cash
Accounts Payable ($1,600 – $100)
Merchandise Inventory ($1,500 x 2%)
Cash
Cash
Merchandise Inventory
Cash
Sales
Sales Returns and Allowances
Cash
Debit
$1,600
Credit
$17,000
900
900
26,000
26,000
3,000
3,000
14,000
280
13,720
a)
Date
June 02
June 05
June 07
June 09
June 10
June 11
June 16
June 17
June 26
© 2013 Vancouver Community College Learning Centre.
Student review only. May not be reproduced for classes.
Credit
$1,600
80
80
100
100
1,100
1,100
730
730
600
6
594
1,500
30
1,470
60
60
400
400
40
40
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b)
Account Title: Cash
Date
Explanation
June 01
Balance
June 05
June 10
June 11
June 16
June 17
June 26
Ref.
J1
J1
J1
J1
J1
Debit
2,500
Credit
80
594
1,470
60
400
40
Account Title: Accounts Receivable
Date
Explanation
Ref.
June 09
J1
Account Title: Merchandise Inventory
Date
Explanation
Ref.
June 01
Balance
June 02
J1
June 05
J1
June 07
J1
June 09
J1
June 10
J1
June 10
J1
June 11
J1
June 16
J1
Account Title: Accounts Payable
Date
Explanation
Ref.
June 02
June 07
June 11
Balance
2,500
2420
1826
356
416
816
776
Debit
1,100
Credit
Balance
1,100
Debit
3,500
1,600
80
Credit
Balance
3,500
5,100
5,180
5,080
4,350
4,950
4,944
4,914
4,854
100
730
600
6
30
60
1,500
Balance
1,600
1,500
0
Debit
Credit
6,000
Balance
6,000
Debit
Credit
1,100
400
Balance
1,100
1,500
Account Title: Sales Returns and Allowances
Date
Explanation
Ref.
Debit
June 26
J1
40
Credit
Balance
40
Account Title: Cost of Goods Sold
Date
Explanation
Ref.
June 09
J1
Credit
Balance
730
Account Title: Common Stock
Date
Explanation
Ref.
June 01
Balance
Account Title: Sales
Date
Explanation
June 09
June 17
Ref.
J1
J1
Debit
Credit
1,600
100
Debit
730
© 2013 Vancouver Community College Learning Centre.
Student review only. May not be reproduced for classes.
3
c)
Lola’s All-Star Tennis Shop
Trial Balance
June 30, 2009
Account
Debit
Cash
Accounts Receivable
Merchandise Inventory
Accounts payable
Common Stock
Sales
Sales returns and allowances
Cost of goods sold
776
1,100
4,854
Credit
0
6,000
1,500
40
730
7,500
7,500
Reference: Weygandt, J. et al. Hospitality Financial Accounting. Second Edition. John Wiley and Sons,
Inc, New Jersey. 2009
© 2013 Vancouver Community College Learning Centre.
Student review only. May not be reproduced for classes.
4