| Course | AC114 Accounting I |
|---|---|
| Unit | Unit 10 |
| Paper type | Comprehensive cycle problem |
| Length | About 880 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Accounting |
| Updated | October 2026 |
Free sample paper for AC114 Unit 10
One October, Bolt to Balance: A Unit 10 Comprehensive Cycle Problem for a Fabric Store on a Perpetual Inventory System
[Student Name]
Purdue University Global
AC114: Accounting I
Unit 10 Comprehensive Cycle Problem
[Instructor Name]
[Date]
Selvage and Thread, Inc., its suppliers, customers and amounts are composite; the textbook, revenue standard and retail shrink survey cited are real.
Opening Balances, October 1
Cash $18,000; Accounts Receivable $1,200; Merchandise Inventory $24,000; Store Fixtures $15,000; Accumulated Depreciation, Fixtures $3,000; Accounts Payable $6,500; Common Stock $30,000; Retained Earnings $18,700. Debits and credits each total $58,200. Selvage and Thread keeps a perpetual record, meaning each bolt bought or yard sold changes the inventory and cost accounts on the day it happens (Franklin et al., 2019).
Stage 1: Journal
Oct. 2. Merchandise Inventory, debit $8,000; Accounts Payable, credit $8,000. Quilting cotton from a mill, terms 2/10, n/30, FOB shipping point. Oct. 3. Merchandise Inventory, debit $240; Cash, credit $240. Freight on the October 2 shipment; under FOB shipping point the buyer pays, and freight becomes part of inventory cost. Oct. 5. Accounts Payable, debit $500; Merchandise Inventory, credit $500. Water-damaged bolts returned to the mill. Oct. 11. Accounts Payable, debit $7,500; Merchandise Inventory, credit $150; Cash, credit $7,350. Paid within ten days; the 2 percent discount on $7,500 is $150 and reduces inventory cost. Oct. 15. Accounts Receivable, debit $2,400; Sales, credit $2,400. Cost of Goods Sold, debit $1,200; Merchandise Inventory, credit $1,200. Fabric sold to a costume shop for a school theater production, terms 1/10, n/30. Oct. 18. Sales Returns and Allowances, debit $200; Accounts Receivable, credit $200. Merchandise Inventory, debit $100; Cost of Goods Sold, credit $100. Unused yardage returned in resalable condition. Oct. 20. Cash, debit $1,200; Accounts Receivable, credit $1,200. September balance collected from a quilting guild. Oct. 24. Cash, debit $2,178; Sales Discounts, debit $22; Accounts Receivable, credit $2,200. Costume shop paid within ten days, 1 percent of $2,200. Oct. 1 to 31, summarized. Cash, debit $14,600; Sales, credit $14,600. Cost of Goods Sold, debit $7,300; Merchandise Inventory, credit $7,300. Register sales for the month. Oct. 31. Accounts Payable, debit $6,500; Cash, credit $6,500. September purchases paid. Oct. 31. Wages Expense $3,800, Rent Expense $2,500 and Utilities Expense $420, debits; Cash, credit $6,720. Oct. 31. Dividends, debit $1,000; Cash, credit $1,000.
Stage 2: Ledger Balances Before Adjustment
Cash: $18,000 less $240, $7,350, $6,500, $6,720 and $1,000, plus $1,200, $2,178 and $14,600, equals $14,168. Merchandise Inventory: $24,000 plus $8,000, $240 and $100, less $500, $150, $1,200 and $7,300, equals $23,190. Accounts Receivable and Accounts Payable both end at zero.
Stage 3: Adjustments
a. Shrinkage. A physical count on October 31 finds $22,950 of fabric at cost against the perpetual record of $23,190. Cost of Goods Sold, debit $240; Merchandise Inventory, credit $240. b. Depreciation on fixtures, $250. Depreciation Expense, debit $250; Accumulated Depreciation, credit $250. c. Wages for October 30 and 31, $380. Wages Expense, debit $380; Wages Payable, credit $380.
The count matters even on a perpetual system, because the records track what should be on the shelves, while only a count shows what is; the $240 gap is fabric lost to cutting waste, damage or theft.
Retailers report shrinkage averaging around 1.6 percent of sales (National Retail Federation, 2023); Selvage and Thread's $240 is about 1.4 percent of October's gross sales.
Stage 4: Multi-Step Income Statement
Sales $17,000, less sales returns and allowances $200 and sales discounts $22, net sales $16,778. Cost of goods sold, $7,300 plus $1,200 less $100 plus $240, equals $8,640. Gross profit $8,138, a gross margin of 48.5 percent. Operating expenses: wages $4,180, rent $2,500, utilities $420, depreciation $250, total $7,350. Net income $788.
Returns and discounts are shown as reductions of sales, consistent with treating them as variable consideration that lowers the revenue the store expects to keep (Financial Accounting Standards Board, 2014).
Stage 5: Retained Earnings and Balance Sheet
Retained earnings: $18,700 plus $788 less $1,000 dividends equals $18,488. Balance sheet, October 31: cash $14,168; merchandise inventory $22,950; total current assets $37,118. Store fixtures $15,000 less accumulated depreciation $3,250, $11,750. Total assets $48,868. Wages payable $380. Common stock $30,000; retained earnings $18,488. Total liabilities and equity $48,868.
Stage 6: Closing
1. Sales, debit $17,000; Income Summary, credit $17,000.
2. Income Summary, debit $16,212; credits to Sales Returns and Allowances $200, Sales Discounts $22, Cost of Goods Sold $8,640, Wages $4,180, Rent $2,500, Utilities $420 and Depreciation $250.
3. Income Summary, debit $788; Retained Earnings, credit $788.
4. The $1,000 dividend is closed straight to Retained Earnings, debiting it and crediting Dividends, without passing through Income Summary.
Stage 7: Post-Closing Trial Balance
Debits: Cash $14,168; Merchandise Inventory $22,950; Store Fixtures $15,000; total $52,118. Credits: Accumulated Depreciation $3,250; Wages Payable $380; Common Stock $30,000; Retained Earnings $18,488; total $52,118.
Reading the Month
The store kept about 48 cents of each net sales dollar after the cost of the fabric, but operating expenses took 44 cents, leaving under 5 cents of profit. Taking the purchase discount saved $150, about a fifth of the month's net income, which shows why paying suppliers within terms matters to a store with thin margins. Returns from the costume shop were small, but a store that sells to schools and theaters should expect them after each production.
References
Financial Accounting Standards Board. (2014). Revenue from contracts with customers (Topic 606) (Accounting Standards Update No. 2014-09). https://www.fasb.org
Franklin, M., Graybeal, P., & Cooper, D. (2019). Principles of accounting, volume 1: Financial accounting. OpenStax. https://openstax.org/details/books/principles-financial-accounting
National Retail Federation. (2023). National retail security survey 2023. https://nrf.com/research/national-retail-security-survey-2023
AC114 Unit 10 instructions, in plain terms
The final AC114 unit gives one full period for a merchandising business and asks for every stage of the cycle. Journalize purchases, freight, returns, discounts, sales and cost of goods sold under the inventory system the problem names, usually perpetual. Post or summarize ledger balances, then record adjustments, including any shrinkage found by a physical count. The income statement should be multi-step, reaching gross profit from revenue after returns and discounts before any operating cost is subtracted. Then roll retained earnings forward and classify the balance sheet. Record closing entries, including contra-revenue accounts, and finish with a post-closing trial balance. Show calculations for discounts and inventory. Keep each stage clearly labeled so later stages can be traced to earlier ones. Cite the textbook and standards where helpful, in APA 7.
How the AC 114 Unit 10 example is put together
The sample lists opening balances totaling $58,200. Stage 1 journalizes twelve entries, including the freight added to inventory, the $500 return, the $150 purchase discount, the costume shop sale with its cost entry, the return of resalable yardage, the $22 sales discount and summarized register sales. Stage 2 computes cash and the perpetual inventory balance of $23,190. Stage 3 adjusts for $240 of shrinkage, depreciation and wages, and the highlighted sentence explains why a perpetual system still needs a count. Stage 4 builds the multi-step income statement, citing the revenue standard on returns and discounts. Stages 5 to 7 present the balance sheet, four closing entries and the post-closing trial balance, and a final reading interprets the margin and the value of the discount.
Reading the AC114 Unit 10 grading rubric
Comprehensive problems are graded stage by stage, and many AC114 instructors award consistency credit when a later stage handles an earlier error correctly. Merchandising entries are checked closely: freight under shipping terms, returns, both kinds of discount and the cost entry with each sale. Shrinkage must be recorded from the physical count. In the multi-step format, the gross profit line has to be visible and correct, because the margin is read from it. Contra-revenue accounts must be closed with the expenses. The post-closing trial balance must contain only permanent accounts. Labeled stages help the grader follow the work. The last AC114 points cover accurate arithmetic throughout and properly formatted APA 7 sources.
AC114 Unit 10 help: mistakes that cost points
The most frequent merchandising errors are recording freight on purchases as an expense instead of inventory cost, and forgetting the cost of goods sold entry that goes with each sale. Purchase discounts are credited to revenue instead of inventory. Sales returns of resalable goods are recorded without returning the cost to inventory. Shrinkage is ignored on a perpetual system. Sales discounts and returns are left open after closing. The income statement is single-step when the prompt asks for multi-step. If your merchandising problem is long and the stages are not tying together, a writer can work it through from your data.
Get an AC114 Unit 10 example written to your instructions
The full Unit 10 data set from your AC114 section, with its instructions and rubric, is all the problem needs. Expect the finished workbook in 24-48h, every stage linked to the one before, which makes a break in your own file traceable. Your first custom sample is on the house. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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AC114 Unit 10 questions, answered
Should I use a perpetual or periodic inventory system?
Whichever the problem specifies, and most AC114 problems at this stage use perpetual, recording cost of goods sold with each sale. Under a periodic system, purchases accumulate in their own account and cost of goods sold is computed at period end from a count. The two produce different journals and a different income statement layout, so matching the assigned system matters more than any other choice.
What if I made an error early in the problem?
Many AC114 instructors award consistency credit when later stages handle a wrong figure correctly, so the error costs points where it occurs without destroying the rest. Correcting it at the source and rebuilding forward is still best if time allows, since a linked workbook updates automatically. A hand-copied document has to be corrected stage by stage.
How do the credit terms 2/10, n/30 affect the entries?
They allow a two percent discount if the invoice is paid within ten days, with the full amount due in thirty. A payment inside the window records the discount, reducing inventory for the buyer under a perpetual system or appearing as sales discounts for the seller. A payment after the window records the full amount with no discount at all.
Where can I find a free AC114 Unit 10 sample paper?
This page holds a complete AC114 Unit 10 comprehensive cycle problem for a fabric store on a perpetual system, from purchase terms and freight to a multi-step income statement and post-closing trial balance.
How was shrinkage found in the AC114 Unit 10 sample?
A physical count on October 31 showed $22,950 of fabric at cost, while the perpetual record showed $23,190. The $240 difference was charged to cost of goods sold.