 
|
Accounting 211
Thursday, January 28th, 1999
Announcements:
1st exam is next Thursday, check syllabus for room assignment. If you have a conflict contact Mike Powell. There is a review session Tuesday in class and Wednesday night. For recitation next week, complete homework for chapters 4 & 5. There will be no class on Thursday of next week.
Lecture notes:
Format for Income Statement:
Net Sales
- Cost of Goods Sold
= Gross Margin (Profit)
- Operating Expenses
- Income Tax Expense
= Net Income
*see page 184 for merchandiser vs. service organizations
Example:
Your company purchases $10,000 of merchandise (for resale) on credit, terms 2/10, N/30, invoice dated 8/11/98.
(2/10: 2% discount if paid within 10 days, N/30: no discount, due within 30 days)
|
8/11/98 |
Purchases |
10,000 |
|
|
|
Accounts Payable |
|
10,000 |
(Purchases is a temporary account used to keep inventory)
Periodic Inventory System --cost of goods sold and inventory are adjusted at the end of a period.
Perpetual Inventory System --entries are updated immediately.
8/14/98
Your company returns $500 of the merchandise acquired on 8/11/98.
|
8/14/98 |
Accounts Payable |
500 |
|
|
|
Purchase Returns and Allowances |
|
500 |
8/19/98
Balance due to supplier is paid. (It is within 10 days, so we get the discount.)
|
8/19/98 |
Accounts Payable |
9,500 |
|
|
|
Cash |
|
9,310 |
|
|
Purchase Discounts |
|
190 |
(9,500 x 2% = 190, we only discount what we keep)
Calculation of Net Purchases:
|
Purchases |
$10,000 |
|
- Purchase R & A |
- 500 |
|
- Purchase Discounts |
- 190 |
|
Net Purchases |
$9,310 |
The Supplier's Journal Entries:
|
8/11 |
Accounts Receivable |
10,000 |
|
|
|
Sales |
|
10,000 |
|
|
|
|
|
|
8/14 |
Sales Returns and Allowances |
500 |
|
|
|
Accounts Receivable |
|
500 |
|
|
|
|
|
|
8/19 |
Cash |
9,310 |
|
|
Sales Discounts |
190 |
|
|
|
Accounts Receivable |
|
9,500 |
Net Sales Calculation:
|
Gross Sales |
$10,000 |
|
- Sales R & A |
- 500 |
|
- Sales Discounts |
- 190 |
|
Net Sales |
$9,310 |
Example:
|
1/1/98 |
12/31/98 |
|
Assets |
100,000 |
120,000 |
|
Liabilities |
70,000 |
65,000 |
|
Equity |
? |
? |
--Contributed Capital is equal to $20,000 on both dates.
--1998 Dividend Payments = $10,000.
What was the 1998 net income?
1998 change in SE = $25,000
1998 Net Income = $35,000
12/31/98 RE balance = $35,000
|
RETAINED EARNINGS |
|
Dividends = 10,000 |
Beginning Balance = 10,000
Net Income = 35,000 |
|
Ending Balance = 35,000 |
Example:
During 1998 a company made the following errors:
1. failed to accrue expenses of $6,000
2. failed to defer revenue of $5,000
3. failed to reduce supplies for supplies consumed amounting to $3,000
What is the impact on the balance sheet?
|
ASSETS |
LIABILITIES |
SE |
|
1) |
NC |
- 6,000 |
+ 6,000 |
|
2) |
NC |
- 5,000 |
+ 5,000 |
|
3) |
+ 3,000 |
NC |
+ 3,000 |
|
+ 3,000 |
- 11,000 |
+ 14,000 |
Example:
10/1/98
A company borrowed $30,000 which is to be repaid on 9/30/99. Interest Rate = 8%.
*unless otherwise specifies, assume interest rate is annual
|
10/1/98 |
Cash |
30,000 |
|
|
|
Notes Payable |
|
30,000 |
|
|
|
|
|
|
12/31/98 |
Interest Expense |
600 |
|
|
|
Interest Payable |
|
600 |
|
|
|
|
|
|
9/30/99 |
Notes Payable |
30,000 |
|
|
Interest Payable |
600 |
|
|
Interest expense |
1,800 |
|
|
|
Cash |
|
32,400 |
Chapter 5 Homework Check Figures:
|
Exercise 8: |
|
|
Net Sales = |
281,800 |
|
Cost of Goods Sold = |
120,400 |
|
Gross Margin = |
161,400 |
|
