Question

At the beginning of the current season on 1 October, the ledger of Hancock’s Pro Shop Pty Ltd showed Cash $5000; Inventory $7000; and Share Capital $12 000. The following transactions occurred during October 2015.

Oct.	5	Purchased golf bags, clubs and balls on account from Balata Ltd $5200, FOB shipping point, terms 2/7, n/60.
	7	Paid freight on Balata Ltd purchases $160.
	9	Received credit from Balata Ltd for inventory returned $200.
	10	Sold inventory on account $2400, terms n/30.
	12	Purchased golf shoes, sweaters and other accessories on account from Arrow Sportswear $1320, terms 1/7, n/30.
	12	Paid Balata Ltd the amount owed.
	17	Received credit from Arrow Sportswear for inventory returned $120.
	18	Paid Arrow Sportswear in full.
	20	Made sales on account $1800, terms n/30.
	27	Granted credit to customers for clothing that did not fit $60.
	30	Made cash sales $1200.
	30	Received payments on account from customers $2200. The chart of accounts for the pro shop includes Cash, Accounts Receivable, Inventory, Accounts Payable, Share Capital, Sales, Sales Returns and Allowances, Purchases, Purchase Returns and Allowances, Discount Received, and Freight-in. REQUIRED: 1) Using T accounts, enter the beginning balances in the ledger accounts and post the October transactions. 2) Prepare a trial balance as at 31 October 2015. 3) Prepare a statement of profit or loss up to gross profit, assuming inventory on hand at 31 October is $8400.

Answer 1

Journal Entries :-

Date	General Journal	Debit	Credit
Oct 5	Inventory	5200
	Accounts Payable		5200
Oct 7	Inventory	160
	Cash		160
Oct 9	Accounts Payable	200
	Inventory		200
Oct 10	Account Receivable	2400
	Sales		2400
Oct 12	Inventory	1320
	Accounts Payable		1320
Oct 12	Account Payable (5200 – 200)	5000
	Inventory (5000 * 2%)		100
	Cash		4900
Oct 17	Accounts Payable	120
	Inventory		120
Oct 18	Account Payable (1320 – 120)	1200
	Inventory (1200 * 1%)		12
	Cash		1188
Oct 20	Account Receivable	1800
	Sales		1800
Oct 27	Sales Return & Allowances	60
	Account Receivable		60
Oct 30	Cash	1200
	Sales		1200
Oct 30	Cash	2200
	Account Receivable		2200

Ledger :-

Cash:-

Beg Bal.	5000
Oct 30	1200	Oct 7	160
Oct 30	2200	Oct 12	4900
		Oct 18	1188
End Bal.	2152

Inventory:-

Beg Bal.	7000
Oct 5	5200	Oct 9	200
Oct 7	160	Oct 12	100
Oct 12	1320	Oct 17	120
		Oct 18	12
End Bal.	13248

Share Capital:-

Beg Bal.			12000
End Bal.			12000

Accounts Payable:-

Beg Bal.
Oct 9	200	Oct 5	5200
Oct 12	5000	Oct 12	1320
Oct 17	120
Oct 18	1200
End Bal.			0

A/c receivable:-

Beg Bal.
Oct 10	2400	Oct 27	60
Oct 20	1800	Oct 30	2200
End Bal.	1940

Sales:-

Beg Bal.
		Oct 10	2400
		Oct 20	1800
		Oct 30	1200
End Bal.			5400

Sales Return & Allowance:-

Beg Bal.
Oct 27	60
End Bal.	60

Trial Balance :-

S.No	Particulars	Debit	Credit
	Cash	2152
	Inventory	13248
	Share Capital		12000
	Account Payable		0
	Account Receivable	1940
	Sales		5400
	Sales Return & allowance	60
	Total	17400	17400

Profit/Loss:-

Sales	5400
(-) Sales Return & allowance	60
(-) Purchases	6248
(-) Beginning Inventory	7000
(+) Ending Inventory	8400
	492