Question

Problem 6-66A (Algorithmic) Recording Sale and Purchase Transactions Alpharack Company sells a line of tennis equipment to retailers. Alpharack uses the perpetual inventory system and engaged in the following transactions during April 2019, its first month of operations:

On April 2, Alpharack purchased, on credit, 320 Wilbur T-100 tennis rackets with credit terms of 2/10, n/30. The rackets were purchased at a cost of $30 each. Alpharack paid Barker Trucking $150 to transport the tennis rackets from the manufacturer to Alpharack's warehouse, shipping terms were F.O.B. shipping point, and the items were shipped on April 2.

On April 3, Alpharack purchased, for cash, 150 packs of tennis balls for $10 per pack. On April 4, Alpharack purchased tennis clothing, on credit, from Designer Tennis Wear. The cost of the clothing was $8,000. Credit terms were 2/10, n/25. On April 10, Alpharack paid for the purchase of the tennis rackets in Transaction a.

On April 15, Alpharack determined that $500 of the tennis clothing was defective. Alpharack returned the defective merchandise to Designer Tennis Wear. On April 20, Alpharack sold 100 tennis rackets at $90 each, 100 packs of tennis balls at $12 per pack, and $4,000 of tennis clothing. All sales were for cash. The cost of the merchandise sold was $5,420.

On April 23, customers returned $575 of the merchandise purchased on April 20. The cost of the merchandise returned was $300.

On April 25, Alpharack sold another 50 tennis rackets, on credit, for $90 each and 25 packs of tennis balls at $12 per pack, for cash. The cost of the merchandise sold was $2,000.

On April 29, Alpharack paid Designer Tennis Wear for the clothing purchased on April 4 minus the return on April 15. j.

On April 30, Alpharack purchased 20 tennis bags, on credit, from Bag Designs for $320. The bags were shipped F.O.B. destination and arrived at Alpharack on May 3.

Required:

1. Prepare the journal entries to record the sale and purchase transactions for Alpharack during April 2019. If no entry is required, select "No entry required" and leave the amount boxes blank. For a compound transaction, if an amount box does not require an entry, leave it blank.

2. Assuming operating expenses of $8,500, prepare Alpharack's income statement for April 2019. (Ignore income tax expense.) Alpharack Income Statement For the Period Ended April 30, 2019

Answer 1

Prepare Journal entry as follows:

Trn.	Date	Account Titles	Debit	Credit
a)	April. 02	Inventory [320 * $30]	$9,600
		Accounts payable		$9,600
		(purchased inventory on credit term 2/10, n/30)
	April. 02	Inventory	$150
		Cash		$150
		(Paid freight costs)
b)	April. 03	Inventory [150 * $10]	$1,500
		Cash		$1,500
		(Purchased inventory for cash)
c)	April. 04	Inventory	$8,000
		Accounts payable -Designer tennis		$8,000
		(purchased inventory on credit term 2/10, n/25)
d)	April. 10	Accounts payable	$9,600
		Inventory [$9600 * 2%]		$192
		Cash		$9,408
		(Paid accounts payable within discount period)
e)	April. 15	Accounts payable -Designer tennis	$500
		Inventory		$500
f)	April. 20	Cash [(100 tennis * $90) + (100 packs * $12) + $4000]	$14,200
		Sales		$14,200
		(Made cash sales)
		COGS	$5,420
		Inventory		$5,420
		(recorded cost of merchandise sold)
g)	April. 23	Sales return	$575
		Cash		$575
		(Recorded return of merchandise)
			$300
		Inventory		$300
		COGS
		(Recorded COGS)
h)	April. 25	Accounts receivable [(50 T balls * $90) +	$4,500
		Cash ( 25 packs * $12)	$300
		Sales		$4,800
		(Made sales, both cash and on account)
		COGS	$2,000
		Inventory		$2,000
		(recorded cost of merchandise sold)
i)	April. 29	Accounts payable [$8000 - $500]	$7,500
		Cash		$7,500
		(Paid off accounts payable)
j)	April. 30	Inventory	$320
		Accounts payable -bag designs		$320
		(Purchased inventory on account)

________________________________________________________________

Prepare Income Statement as follows:

Alpharack Company
Income Statement
For the period ended April. 30, 2019
Sales [$14200 + $4800]	$19,000
Less: Sales return	($575)
Net Sales		$18,425
Less: COGS		($7,120)
Gross profit		$11,305
Less: Operating Expenses		($8,500)
Profit		$2,805

COGS
April. 20	$5,420	April. 23	$300
April. 25	$2,000
End. Bal.	$7,120

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