Question

The following trial balance pertains to Benji's Grocery as of January 1, 2018: Account Title Cash Accounts receivable Merchandise inventory Accounts payable Common stock Retained earnings Beginning Balances $23,000 3,400 44,000 3,400 37,000 30,000 The following events occurred in 2018. Assume that Benji's uses the periodic inventory method. 1. Purchased land for $8,400 cash. 2. Purchased merchandise on account for $90,000, terms 2/10, n/45. 3. Paid freight of $700 cash on merchandise purchased FOB shipping point. 4. Returned $3,000 of defective merchandise purchased in Event 2. 5. Sold merchandise for $80,000 cash. 6. Sold merchandise on account for $81,000, terms 3/10, n/30. 7. Paid cash within the discount period on accounts payable due on merchandise purchased in Event 2. 8. Paid $11,000 cash for selling expenses. 9. Collected $44,000 of the accounts receivable from Event 6 within the discount period. 10. Collected $37,000 of the accounts receivable but not within the discount period. 11. Paid $5,800 of other operating expenses. 12. A physical count indicated that $47,000 of inventory was on hand at the end of the accounting period. Required: a. Record the preceding transactions in a horizontal statements model. In the Cash Flows column, use OA to designate operating activity, IA for investing activity, FA for financing activity, or NC for net change. If the account is not affected by the event, leave the cell blank. The beginning balances have been recorded as an example. b. Prepare a schedule of cost of goods sold and an income statement.

Answer 1

a.	Event	Balance sheet	Income statement	Statement of cash flows
	Assets	=	Liabilities	+	Stockholder's equity	Revenue	-	Expenses	=	Net income
	Cash	+	Accounts receivable		Merchandise inventory	+	Land	=	Accounts payable	+	Common stock	+	Retained earnings
	Bal.	23000		3400		44000				3400		37000		30000
	1	-8400						8400												-8400	IA
	2									90000				-90000	0		90000		-90000
	3	-700												-700	0		700		-700	-700	OA
	4									-3000				3000	0		-3000		3000
	5	80000												80000	80000		0		80000	80000	OA
	6			81000										81000	81000		0		81000
	7a.	-85260								-85260										-85260	OA
		(90000-3000)*98%
	7b.									-1740				1740	0		-1740		1740
																	(90000-3000)*2%
	8	-11000												-11000	0		11000		-11000	-11000	OA
	9a.	42680		-42680																42680	OA
		(44000*97%)
	9b.			-1320										-1320	-1320		0		-1320
															(44000*3%)
	10	37000		-37000																37000	OA
	11	-5800												-5800	0		5800		-5800	-5800	OA
	12					3000								3000	0		-3000		3000
						(47000-44000)
	Total	71520	0	3400	0	47000		8400	0	3400	0	37000		89920	159680	0	99760		59920

b.		Benji's Grocery
		Schedule of cost of goods sold
						$		$
	Beginning inventory 1/1/2018					44000
	Purchases					90000
	Purchase discounts					-1740
	Purchase returns and allowances					-3000
	Transportation-in					700
	Cost of goods available for sale							129960
	Less:Ending merchandise inventory							47000
	Cost of goods sold							82960

C. Benji's Grocery Income statement For the year ended December 31, 2018 $ $ (80000+81000) 161000 1320 159680 82960 Revenue: Sales revenue Less:Sales discount Net sales Less: Cost of goods sold Gross profit Less:Operating expenses Selling expenses Other expenses Total operating expenses Net income 76720 11000 5800 16800 59920