Question

CHAPTER 5

FATABÚÐ Distributing Company completed these merchandising transactions in the month of April. At the beginning of April, the ledger of FATABÚÐ showed Cash of $10,000 and Common Stock of $10,000.

Apr. 2 Purchased merchandise on account from Drekka Co. $8,700, terms 2/10, n/30.
Apr. 4 Sold merchandise on account to Gata, Inc. $6,000, terms 2/10, n/30, FOB Destination. The cost of the merchandise sold was $3,700.

Apr. 5 Paid $200 freight by check on April 4 sale.
Apr. 6 Received credit from Drekka Co. for merchandise returned $400.
Apr. 11 Paid Drekka Co. in full, less discount.
Apr. 13 Received collections in full, less discounts, from Gata, Inc., billed on
April 4.
Apr. 14 Purchased merchandise from Flug, Inc. for cash $4,700. No shipping costs incurred.
Apr. 16 Received refund of $500 from Flug, Inc. for returned merchandise on cash purchase of April 14.
Apr. 18 Purchased merchandise from Sigga Distributors $5,500, terms 2/10, n/30, FOB Shipping Point.
Apr. 20 Paid freight by check on April 18 purchase $180.
Apr. 23 Sold merchandise for cash to Kirkja, Inc. for $8,300. The cost of the merchandise sold was $5,580.
Apr. 26 Purchased merchandise for cash from Silung, Inc. for $2,300.
Apr. 27 Paid Sigga Distributors in full, less discount.
Apr. 29 Made refunds to various cash customers for returned merchandise $180. The returned merchandise had a cost of $120.
Apr. 30 Sold merchandise on account to Frimirki, Inc. $3,980, terms n/30. The cost of the merchandise sold was $2,500. No shipping charges.

FATABÚÐ Distributing Company’s chart of accounts includes:

Cash, Accounts Receivable, Inventory, Accounts Payable, Common Stock, Sales Revenue, Sales Returns and Allowances, Sales Discounts, Cost of Goods Sold, and Freight-Out.

Instructions (a) Journalize the transactions. (b) Prepare the income statement through gross profit for the month of April 2014.

TIP: Since you need to prepare an income statement through gross profit, you should keep track of your accounts as you go along.

Answer 1

a)

Date	General Journal	Debit	Credit
2-Apr	Inventory	8700
	Accounts Payable		8700
4-Apr	Accounts Receivable	6000
	Sales Revenue		6000
4-Apr	Cost of Goods Sold	3700
	Inventory		3700
5-Apr	Freight Out	200
	Cash		200
6-Apr	Accounts Payable	400
	Inventory		400
11-Apr	Accounts Payable	8300
	Cash		8134
	Cost of Goods Sold		166
13-Apr	Cash	5880
	Sales Discounts	120
	Accounts Receivable		6000
14-Apr	Inventory	4700
	Cash		4700
16-Apr	Cash	500
	Inventory		500
18-Apr	Inventory	5500
	Accounts Payable		5500
20-Apr	Freight Out	180
	Cash		180
23-Apr	Cash	8300
	Sales Revenue		8300
23-Apr	Cost of Goods Sold	5580
	Inventory		5580
26-Apr	Inventory	2300
	Cash		2300
27-Apr	Accounts Payable	5500
	Cash		5390
	Sales Discounts		110
29-Apr	Sales Return and Allowance	180
	Cash		180
29-Apr	Inventory	120
	Cost of Goods Sold		120
30-Apr	Accounts Receivable	3980
	Sales Revenue		3980
30-Apr	Cost of goods sold	2500
	Inventory		2500

b)

Income Statement
Particulars	Calculation	Amount
Sales Revenue	6000+8300+3980	18,280.00
Sales Discounts	120+110	230.00
Sales Return and Allowances		180.00
Net Sales Revenue	Sales Revenue - Sales Discounts - Sales Return and Allowances	17,870.00
Cost of Goods Sold	3700-166+5580-120+5500	14,494.00
Freight Out	200+180	380.00
Gross Profit	Net Sales Revenue - Cost of Goods Sold - Freight Out	2,996.00