Question

291 Chapter 5 Accounting for Retail Business Cash Asset EMPLATE $ 275,000 6,590,000 4,100,000 32,000 13,000 45.000 Accumulated Depreciation-daid) Appendix 2 PR 5-10B Periodic inventory accounts, multiple-step income statement, closing entries et income On June 30, 2049, the balances of the accounts appearing in the ledger of Simkins Company are $1,208,000 as follows: $125,000 Dividends Accounts Receivable asset 340,000 Sales Inventory, July 1, 2018 415,000 Purchases Estimated Returns Inventory, Purchases Returns and Allowances July 1, 2018 25,000 Purchases Discounts Office Supplies 9,000 V Freight in Prepaid Insurance 18,000 Sales Salaries Expense 580,000 Land 300,000 V Advertising Expense 315,000 Store Equipment 550,000V Delivery Expense 18,000 Accumulated Depreciation - 1. Depreciation Expense- Store Equipment divid 190,000 Store Equipment 12.000 250,000 Miscellaneous Selling Expense 28,000 Office Salaries Expense 375,000 Office Equipment 110,000 Rent Expense 43,000 Accounts Payable C. 85,000 Insurance Expense 17,000 Customer Refunds Payable CD 30,000 V Office Supplies Expense 5,000 Salaries Payable-lob 9,000 Depreciation Expense- Uneamed Rent 6,000 Y Office Equipment 4,000 Notes Payable - Liob 50,000 V Miscellaneous Administrative Expense 16,000 Common Stock - Stick holder caudy 300,000 Rent Revenue 32,500 Retained Earnings 520,000 V Interest Expense 2,500 Instructions 1. Does Simkins Company use a periodic or perpetual inventory system? Explain. 2. Prepare a multiple-step income statement for Simkins Company for the year ended June 2049. The inventory as of June 30, 20Y9, was $508,000. The estimated cost of customer retu inventory for June 30, 2099, is estimated to increase to $33,000. 3. Prepare the closing entries for Simkins Company as of June 30, 2089. 4. What would be the net income if the perpetual inventory system had been used?

Answer 1

solution1 : simkins company uses a periodic inventory system because it maintains accounts for purchases , purchases returns and allowances , purchaases discounts and freight in.

solution 2: simkins company

INCOME STATEMENT

FOR THE YEAR ENDED JUNE 30,2019

sales (A)			65,90,000
cost of goods sold:
mrechandise inventory , july 1,2018		$415,000
cost of merchandise purchased ;
purchases	41,00,000
purchase return	(32,000)
purchase discounts	(13000)
net purchase	4055000
freight in	45,000
Total cost of merchandise purchased		41,00,000
merchandise available for sale		4515,000
mrechandise inventory , june 30,2019		(508,000)
cost of merchandise sold before estimated returns		4007,000
increase in estimated returns inbentory		(33,000)
cost of merchandise sold(B)			3,974,000
GROSS PROFIT(A-B)			26,16,000
EXPENSES :-
selling expenses:
sales salaries exp	5,80,000
advertising exp	315,000
Delivery exp	18,000
Depreiciation expenses - store equipment	12,000
misc. selling exp	28,000
Total selling expenses(C)		953,000
Administration expenses :
office salaries exp.	375,000
rent exp	43,000
insurance exp	17,000
office supplies exp.	5000
Depreiciation expenses - office equipment	4000
Misc. Adm. exp	16,000
total Administration expenses(D)		4,60,000
TOTAL OPERATING EXPENSES(C+D)			1413000
INCOME FROM OPEARTIONS			1203000
OTHER REVENUE AND EXPENSES :
RENT REVENUE		32500
INTEREST EXP		(2500)	30,000
NET INCOME			1233000

SOLUTION 3

DATE	CLOSING ENTRIES	DEBIT	CREDIT
JUNE30	MRECHANDIS INVENTORY(JUNE30,2019)	508,000
	ESTIMATED RETURNS INVENTORY	33,000
	SALES	65,90,000
	PURCHASE REUTURNS	32,000
	PURCHASE DISCOUNTS	13,000
	RENT REVENUE	32,500
	INCOME SUMMARY		7,208,500
JUNE 30	INCOME SUMMARY	59,75,500
	MRECHANDIS INVENTORY(JULY1,2018)		415,000
	PURCHASE		41,00,000
	FREIGHT IN		45,000
	SALES SALARIES EXP		580,000
	ADVERTISING EXP		315,000
	DELIVERY EXP		18,000
	DEPRICATION EXP -STORE EQUIPMENT		12,000
	MISC. SELLING EXP.		28,000
	OFFICE SALARIES EXP.		375,000
	RENT EXP		43,000
	INSURANCE EXP		17,000
	OFFICE SUPPLIES EXP		5,000
	DEPRICATION EXP-OFFICE EQUIPMENT		4,000
	INTEREST EXP		25,00
	MISC. ADMINSTRATION EXP		16,000
JUNE30	INCOME SUMMARY	12,33,000
	TO RETAINED EARNING		12,33,000
JUNE30	RETAINED EARNING	275,000
	TO DIVIDENDS		275,000

SOLUTION 4
$12,33,000 the same net income as under the periodic inventory system.

(if you have any query related to this ask me ...and rate me if you like my work ,,,all the best champ )