Question

1. Assuming that CD City uses a perpetual inventory system, record the transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
  

Journal entry worksheet

At the beginning of July, CD City has a balance in inventory of $3,150. The following transactions occur during the month of July.

.....

Purchase CDs on account from Wholesale Music for $2,050, terms 2/10, n/30.

Note: Enter debits before credits.

	Date General Journal Debit Credit July 03

July 4 Pay cash for freight charges related to the July 3 purchase from Wholesale Music, $120.

July 9 Return incorrectly ordered CDs to Wholesale Music and receive credit, $200.

July 11 Pay Wholesale Music in full.

July 12 Sell CDs to customers on account, $5,300, that had a cost of $2,750.

July 15 Receive full payment from customers related to the sale on July 12.

July 18 Purchase CDs on account from Music Supply for $2,850, terms 2/10, n/30.

July 22 Sell CDs to customers for cash, $3,950, that had a cost of $2,250.

July 28 Return CDs to Music Supply and receive credit of $250.

July 30 Pay Music Supply in full.

Problem 6-3A Part 2

2. Prepare the top section of the multiple-step income statement through gross profit for the month of July.
  

	CD CITY Multiple-step Income Statement (partial) For the month of July

Answer 1

1.

Date	General Journal	Debit	Credit
Jul-03	Inventory	2050
	Accounts payable		2050
	(To record purchase of inventory on account)
Jul-04	Inventory	120
	Cash		120
	(To record freight charges paid in cash)
Jul-09	Accounts payable	200
	Inventory		200
	(To record purchase returns)
Jul-11	Accounts payable ($2050 - $200)	1850
	Inventory (2% x $1850)		37
	Cash		1813
	(To record payment on account)
Jul-12	Accounts receivable	5300
	Sales revenue		5300
	(To record sales on account)
Jul-12	Cost of goods sold	2750
	Inventory		2750
	(To record cost of sales)
Jul-15	Cash	5300
	Accounts receivable		5300
	(To record collection on account)
Jul-18	Inventory	2850
	Accounts payable		2850
	(To record purchase of inventory on account)
Jul-22	Cash	3950
	Sales revenue		3950
	(To record sales on account)
Jul-22	Cost of goods sold	2250
	Inventory		2250
	(To record cost of sales)
Jul-28	Accounts payable	250
	Inventory		250
	(To record purchase returns)
Jul-30	Accounts payable ($2850 - $250)	2600
	Cash		2600
	(To record payment on account)

2.

CD CITY
Multi-step Income Statement (Partial)
For the month of July
Sales revenue	9250
Cost of goods sold	5000
Gross profit $	4250