Based on the following data, determine the cost of merchandise sold for November:

Based on the following data, determine the cost of merchandise sold for November:


Merchandise inventory, November 1 $ 28,000
Merchandise inventory, November 30 31,500
Purchases 475,000
Purchases returns and allowances 15,000
Purchases discounts 9,000
Freight in 7,000






Answer:

Cost of merchandise sold:
Merchandise inventory, November 1 $ 28,000
Purchases $475,000
Less: Purchases returns and
allowances $15,000
Purchases discounts 9,000 24,000
Net purchases $451,000
Add freight in 7,000
Cost of merchandise purchased 458,000
Merchandise available for sale $486,000
Less merchandise inventory, November 30 31,500
Cost of merchandise sold $454,500





Based on the following data, determine the cost of merchandise sold for July:


Merchandise inventory, July 1 $ 190,850
Merchandise inventory, July 31 160,450
Purchases 1,126,000
Purchases returns and allowances 46,000
Purchases discounts 23,000
Freight in 17,500





Answer:

Cost of merchandise sold:
Merchandise inventory, July 1 $ 190,850
Purchases $1,126,000
Less: Purchases returns and
allowances $46,000
Purchases discounts 23,000 69,000
Net purchases $1,057,000
Add freight in 17,500
Cost of merchandise purchased 1,074,500
Merchandise available for sale $1,265,350
Less merchandise inventory, July 31 160,450
Cost of merchandise sold $1,104,900

Identify the errors in the following schedule of the cost of merchandise sold for the current year ended May 31, 2014:

Identify the errors in the following schedule of the cost of merchandise sold for the current year ended May 31, 2014:


Cost of merchandise sold:
Merchandise inventory, May 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 105,000
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,110,000
Plus: Purchases returns and allowances . . . . . . . . . . . . . . . . . . . . . . . . $55,000
 Purchases discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 85,000
Gross purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,195,000
Less freight in . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,000
Cost of merchandise purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,173,000
Merchandise available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,278,000
Less merchandise inventory, June 1, 2013 . . . . . . . . . . . . . . . . . . . . . . 91,300
Cost of merchandise sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,186,700


Answer:
1. The schedule should begin with the June 1, 2013, not the May 31, 2014, merchandise inventory.
2. Purchases returns and allowances and purchases discounts should be deducted from (not added to) purchases.
3. The result of subtracting purchases returns and allowances and purchases discounts from purchases should be labeled “net purchases.”
4. Freight in should be added to net purchases to yield cost of merchandise purchased.
5. The merchandise inventory at May 31, 2014, should be deducted from merchandise available for sale to yield cost of merchandise sold.

A correct cost of merchandise sold section is as follows:

Cost of merchandise sold:

Merchandise inventory, June 1, 2013 $ 91,300
Purchases $1,110,000
Less: Purchases returns and
allowances $55,000
Purchases discounts 30,000 85,000
Net purchases $1,025,000
Add freight in 22,000
Cost of merchandise purchased 1,047,000
Merchandise available for sale $1,138,300
Less merchandise inventory, May 31, 2014 105,000
Cost of merchandise sold $1,033,300





Complete the following table by indicating for (a) through (g) whether the proper answer is debit or credit.


Account Increase Decrease
Normal
Balance
Purchases debit (a) (b)
Purchases Discounts credit (c) credit
Purchases Returns and Allowances (d) (e) (f)
Freight In debit (g) debit


Answer:
(a) credit
(b) debit
(c) debit
(d) credit
(e) debit
(f) credit
(g) credit

The cost of merchandise sold reported on the income statement was $240,000. The accounts payable balance increased $12,000,

The cost of merchandise sold reported on the income statement was $240,000. The accounts payable balance increased $12,000, and the inventory balance increased by $19,200 over the year. Determine the amount of cash paid for merchandise.


Answer:






Cost of merchandise sold……………………………………………………………… $240,000
Add increase in inventories……………………………………………………………… 19,200
Deduct increase in accounts payable………………………………………………… (12,000)
Cash paid for merchandise……………………………………………………………… $247,200