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Financial & Managerial Accounting
Found in: Page 218
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Use the data for Barkley Company in Problem 4-3B to complete the following requirements.


1. Prepare closing entries as of March 31, 2017 (the perpetual inventory system is used).

Analysis Component

2. In prior years, the company experienced a 5% returns and allowance rate on its sales, which means approximately 5% of its gross sales were eventually returned outright or caused the company to grant allowances to customers. Compute the ratio of sales returns and allowances divided by gross sales. How does this year’s ratio compare to the 5% ratio in prior years?


  1. Both sides of the journal totals $665,300.
  2. Sales return percentage is 6.01%.
See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Definition of Closing Entries

Closing entries, also known as retained earnings, are journal entries prepared for transferring the balance of temporary accounts to permanent accounts.

Step 2: Closing Entries


Accounts and Explanation

Debit $

Credit $

31 Aug 2017



Income summary


31 Aug 2017

Income summary


Sales discount


Sales return and allowances


Cost of goods sold


Sales salaries expenses


Rent expenses – selling space


Store supplies expenses


Advertising expenses


Office salaries expenses


Rent expenses – office space


Office supplies expenses


31 Aug 2017

Income summary


Retained earnings




Step 3: Sales return percentage

The sales return percentage of the previous year reflects a good position than the current year because the sales return percentage of the previous year is less than the current year.

Most popular questions for Business-studies Textbooks

Prepare journal entries to record the following merchandising transactions of Menards, which applies the perpetual inventory system and gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 3 in Accounts Payable—OLB.)

July 3 Purchased merchandise from OLB Corp. for $15,000 under credit terms of 1∕10, n∕30, FOB destination, invoice dated July 3.

7 Sold merchandise to Brill Co. for $11,500 under credit terms of 2∕10, n∕60, FOB destination, invoice dated July 7. The merchandise had cost $7,750.

10 Purchased merchandise from Rupert Co. for $14,200 under credit terms of 1∕10, n∕45, FOB shipping point, invoice dated July 10.

11 Paid $300 cash for shipping charges related to the July 7 sale to Brill Co.

12 Brill returned merchandise from the July 7 sale that had cost Menards $1,450 and been sold for $2,000. The merchandise was restored to inventory.

14 After negotiations with Rupert Co. concerning problems with the merchandise purchased on July 10, Menards received a credit memorandum from Rupert granting a price reduction of $1,200.

15 At OLB’s request, Menards paid $200 cash for freight charges on the July 3 purchase, reducing the amount owed to OLB.

17 Received balance due from Brill Co. for the July 7 sale less the return on July 12.

20 Paid the amount due Rupert Co. for the July 10 purchase less the price reduction granted on July 14.

21 Sold merchandise to Brown for $11,000 under credit terms of 1∕10, n∕30, FOB shipping point, invoice dated July 21. The merchandise had cost $7,000.

24 Brown requested a price reduction on the July 21 sale because the merchandise did not meet specifications. Menards sent Brown a credit memorandum for $1,000 toward the $11,000 invoice to resolve the issue.

30 Received Brown’s cash payment for the amount due from the July 21 sale less the price allowance from July 24.

31 Paid OLB Corp. the amount due from the July 3 purchase.


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