Question

Accounts Payable	$ 60,000	Nathan New, Capital	$    241,800
Accounts Receivable	110,000	Nathan New, Withdrawals	50,000
Accumulated Amortization, Furniture	80,000	Purchases	1,200,000
Bank Loan, Long Term	130,000	Salary Payable	15,000
Cash	20,000	Sales Discounts	30,000
Furniture	320,000	Sales Returns & Allowances	40,000
General Expenses	200,000	Sales Revenue	2,000,000
Interest Expense	8,000	Selling Expenses	400,000
Interest Payable	1,000	Supplies	20,000
Interest Revenue	200	Unearned Sales Revenue	10,000
Inventory, July 31, 2017	140,000

Required:

1. Prepare a single-step income statement for Nothing New at July 31, 2018 year end. Inventory was valued at $ 200,000 at July 31, 2018 based on a physical count.
2. Prepare the statement of owner’s equity for Nothing New at July 31, 2018.
3. Prepare a classified balance sheet for Nothing New at July 31, 2018.

Question 2

(20 marks)

Required:

1. Use the data from Question 1 to prepare a multi-step income statement for Nothing New at July 31, 2018 year end.
2. Owner, Nathan New, tries to achieve a gross margin of at least 40% and a net income of at least 15%. Keeping in mind that net income percentage is equal to net income/net sales revenue, has Nathan New achieved those results?

Question 3

(25 marks)

Toy Store and Toy Warehouse incurred the following transactions in November 2018:

• November 05: Toy Warehouse sold $ 75,000 toys to Toy Store. The sale had credit terms 2/10, n/30, FOB shipping.
• November 09: Toy Store returned $ 10,000 toys that it purchased on November 05. Toy Store received a credit memo for this.
• November 13: Toy Store paid $ 50,000 of the November 05 invoice amount that it owed to Toy Warehouse.
• November 19: Toy Store paid the remaining balance that it owed to Toy Warehouse.

Required:

1. Record these transactions on the accounting records of Toy Store. Explanations are not required when recording the journal entries.
2. Then, record these transactions on the accounting records of Toy Warehouse. Explanations are not required when recording the journal entries. Both businesses used the periodic inventory system. Discounts were permitted on particular payments.

Question 4

(25 marks)

Sammy’s Sportswear sells sport jerseys. It has a May 31, 2018 year end.

On February 28, 2018, Sammy’s Sportswear had in inventory of 40 jerseys that each cost $ 20. During the next 3 months, Sammy’s Sportswear purchased the following merchandise:

                                                Units               Unit Cost                     Total

March                                      50                    $ 30                             $ 1,500

April                                        100                  $ 40                             $ 4,000

May                                         150                  $ 50                             $ 7,500

During March, April, and May, Sammy’s Sportswear sold the following merchandise:

                                                Units               Unit Selling Price       Total

March                                      60                    $ 60                             $ 3,600

April                                        40                    $ 70                             $ 2,800

May                                         90                    $ 90                             $ 8,100

Operating expenses for March, April, and May totalled $ 3,500. Sammy’s Sportswear used a perpetual inventory system. Assume that monthly purchases occurred on the first day of each month.

Required:

1. Calculate Sammy’s Sportswear’s ending inventory at May 31, 2018 using the moving-weighted-average costing method and the FIFO costing method.
2. Prepare Sammy’s Sportswear’s May 31, 2018 income statement for both the moving-weighted-average costing method and the FIFO costing method. Record the gross margin and operating income.

Answer 1

Question 1 Ans.(A) Single Step Income Statement for Nothing New at July 31, 2018 Particulars Amount Revenues & Gains: Sales Revenue after Returns 1960000 Interest Revenue 1960200 200 Expenses & Losses: Cost of Goods Sold (Opening Inventory Selling Expenses General Expenses Acc. Amortization, Furniture Discount on Sales Supplies Interest Expense 1140000 400000 200000 80000 30000 20000 8000 -1878000 Net Income 82200 Note: Cost of Goods Sold = Opening Inventory + Purchases - Closing Inventory Question 1 Ans. (B) Statement of Owner's Equity for Nothing New at July 31, 2018 Opening Equity 241800 Add: Owner's Contributions (Calculated) 180000 Net Income 82200 262200 Less: Owner's Withdrawls Net Loss 50000 -50000 Closing Equity 454000 Clos. Equity: Get it from Balance Sheet Ans.C Open. Equity: Closing Equity + Owner's Withdrawls + Net Loss - Owner's Contributions - Net Income