Question

Q1.

In this question, you need to provide an amount for each transaction.

1- A merchandising company purchases merchandise inventory on credit, the credit terms are 2/10,n/30.

2- The company pays the amount due within the purchase discount period.

Required:

A. Record the journal entries for both transactions: issuance of the invoice, payment.

B. Prepare the T-Accounts for: Accounts Payable and Merchandise Inventory.

Q2-

On your own words, talk briefly about two of the inventory costing methods, give one example of each method.

Q3.

A- Explain how to calculate the net income for merchandising companies, why is it different than calculating the net income for service companies.

B- Prepare the income Statement for Yazeed merchandising company for December 2018 that has the followings:

Sales: 1,000,000

Sales discount: 20,000

Salaries expenses: 100,000

Advertising expenses: 100,000

Sales returns and allowances: 50,000

Insurance expenses: 10,000

Costs of Goods Sold: 450,000

Answer 1

Q1. A merchandising company purchases merchandise inventory $ 50,000 on credit, the credit terms are 2/10, n 30.

Transaction / Event	Account Titles and Explanations	Debit	Credit
		$	$
1.	Merchandise Inventory	50,000
	Accounts Payable		50,000
	To record issuance of invoice for purchase of merchandise inventory on account
2.	Accounts Payable	50,000
	Merchandise Inventory		1,000
	Cash		49,000

Accounts Payable:

2.	1,000	1.	50,000
2	49,000
		Balance	0

Merchandise Inventory:

1.	50,000	2.	1,000
Balance	49,000

Q 3 :

B.

Yazeed Merchandising Company Income Statement For the period ending December 31, 2018
	$	$
Sales	1,000,000
Less: Sales Returns and Allowances	50,000
Less: Sales Discount	20,000
Net Sales		930,000
Cost of Goods Sold		450,000
Gross Profit		480,000
Operating Expenses
Advertising Expense	100,000
Salaries Expense	100,000
Insurance Expense	10,000
Total Selling and Administrative Expenses		210,000
Net Operating Income		270,000