ACC 296 Lecture Notes - Lecture 4: Retained Earnings, General Journal, Accounts Receivable

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indigolion532

18 May 2018

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A group of persons elected by the stockholders to govern a corporation.

Credit memorandum

A form prepared by the vendor showing the amount deducted for returns and allowances.

Debit memorandum

A form prepared by the customer showing the price deduction taken by the customer for a return or an

allowance.

Declaring a dividend

Action by a board of directors to distribute corporate earnings to stockholders.

Dividends

Earnings distributed to stockholders.

General journal

A journal with two amount columns in which all kinds of entries can be recorded.

Purchases allowance

Credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease

in the customer's account.

Purchases return

Credit allowed for the purchase price of returned merchandise, resulting in a decrease in the customer's

account.

Retained earnings

An amount earned by a corporation and not yet distributed to stockholders.

Sales allowance

Credit allowed to a customer for part of the sales price of merchandise that is not returned, resulting in

a decrease in the accounts receivable of the merchandising business.

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Document Summary

A group of persons elected by the stockholders to govern a corporation. A form prepared by the vendor showing the amount deducted for returns and allowances. A form prepared by the customer showing the price deduction taken by the customer for a return or an allowance. Action by a board of directors to distribute corporate earnings to stockholders. A journal with two amount columns in which all kinds of entries can be recorded. Credit allowed for part of the purchase price of merchandise that is not returned, resulting in a decrease in the customer"s account. Credit allowed for the purchase price of returned merchandise, resulting in a decrease in the customer"s account. An amount earned by a corporation and not yet distributed to stockholders. Credit allowed to a customer for part of the sales price of merchandise that is not returned, resulting in a decrease in the accounts receivable of the merchandising business.

Related Questions

QUESTION 1

The ownership of a corporation is represented by:

		shares of stock.
		the owner's capital account.
		the revenue account.
		cash in bank account.

QUESTION 2

How many classifications does a Capital Stock Account have?

		One
		Two
		Three
		Four

QUESTION 3

The equity contributed by stockholders and equity earned throughbusiness profits represent the stockholders' equity for a:

		partnership firm.
		sole proprietorship.
		corporation.
		none of these.

QUESTION 4

Retained earnings are a part of a/an:

		asset account.
		permanent account.
		stockholders' equity account.
		temporary account.

QUESTION 5

How many sections does an Income Statement have?

		Two
		Three
		Four
		Five

QUESTION 6

Net sales are related to the:

		net income section.
		gross profit on sales section.
		revenue section.
		cost of merchandise sold section.

QUESTION 7

Sales discount and sales return and allowance are:

		revenue accounts.
		contra revenue accounts.
		permanent accounts.
		contra expenses accounts.

QUESTION 8

The total cost related to merchandise purchases during anaccounting period is the:

		net purchase.
		cost of merchandise sold.
		cost of merchandise available for sale.
		beginning merchandise inventory.

QUESTION 9

The gross profit on sale is $65,000, and operating expenses is$35,000. What will be the operating profit?

		$65,000
		$35,000
		$100,000
		$30,000

QUESTION 10

A balance sheet has the following sections:

		Assets, liabilities, and stockholders' equity.
		Income, expenses, and stockholders' equity.
		Assets, liabilities, and income.
		Operating income, operating expenses, and stockholders'equity.

QUESTION 11

A cash flow statement is used to assess the:

		net increase or decrease of cash.
		net increases of cash only.
		net decrease of cash only.
		net profit or loss of business.

Halifax Manufacturing allows its customers to return merchandise for any reason up to 90 days after delivery and receive a credit to their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2018 with an allowance for sales returns of $420,000. During 2018, Halifax sold merchandise on account for $12,700,000. This merchandise cost Halifax $7,620,000 (60% of selling prices). Also during the year, customers returned $619,000 in sales for credit. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at the end of the year.

Required:

1. Prepare an entry to record actual merchandise returns as they occur (not adjusting the allowance for sales returns), and then record a year-end entry to adjust the allowance for sales returns to its appropriate balance.
2. What is the amount of the year-end allowance for sales returns after the adjusting entry is recorded?

REQUIRED 1. Prepare an entry to record actual merchandise returns as they occur (not adjusting the allowance for sales returns), and then record a year-end entry to adjust the allowance for sales returns to its appropriate balance. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

REQUIRED 2:What is the amount of the year-end allowance for sales returns after the adjusting entry is recorded?

[The following information applies to the questions displayed below.]

Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis:


a.	Sold merchandise for cash (cost of merchandise $10,797).	$15,200
b.	Received merchandise returned by customers as unsatisfactory (but in perfect condition), for cash refund (original cost of merchandise $90).	150
c.	Sold merchandise (costing $2,613) to a customer, on account with terms 2/10, n/30.	5,500
d.	Collected half of the balance owed by the customer in (c) within the discount period.	2,695
e.	Granted a partial allowance relating to credit sales that the customer in (c) had not yet paid	88

Required:
1.	Compute Sales Revenue, Net Sales, and Gross Profit for Hair World.


Sales Revenue
Net Sales
Gross Profit

2.	Compute the gross profit percentage. (Round your answer to 1 decimal place.)

Gross Profit Percentage

Prepare journal entries to record transactions (a)â(e). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

a1) Record the cash sales of $15,200.

a2) Record the cost of goods sold of $10,797.

b1) Record the return by a customer of unsatisfactory merchandise that was in perfect condition. A cash refund of $150 was given to the customer.

b2) Record the merchandise returned by the customer back into inventory. The original cost of the merchandise was $90.

c1) Record the sales on account of $5,500 on terms 2/10, n/30.

c2) Record the cost of goods sold of $2,613.

d) Record the collection of half of the balance of $2,695 owed by the customer within the discount period.

e) Record the allowance of $88 granted to the customer.

ACC 296 Lecture Notes - Lecture 4: Retained Earnings, General Journal, Accounts Receivable

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