Question

Wildhorse Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, Wildhorses’ ledger showed Cash of $8,100 and Common Stock of $8,100.

May 1		Purchased merchandise on account from Black Wholesale Supply for $8,100, terms 1/10, n/30.
2		Sold merchandise on account for $4,500, terms 2/10, n/30. The cost of the merchandise sold was $3,400.
5		Received credit from Black Wholesale Supply for merchandise returned $200.
9		Received collections in full, less discounts, from customers billed on May 2.
10		Paid Black Wholesale Supply in full, less discount.
11		Purchased supplies for cash $900.
12		Purchased merchandise for cash $3,100.
15		Received $230 refund for return of poor-quality merchandise from supplier on cash purchase.
17		Purchased merchandise from Wilhelm Distributors for $2,500, terms 2/10, n/30.
19		Paid freight on May 17 purchase $250.
24		Sold merchandise for cash $5,500. The cost of the merchandise sold was $4,100.
25		Purchased merchandise from Clasps Inc. for $800, terms 3/10, n/30.
27		Paid Wilhelm Distributors in full, less discount.
29		Made refunds to cash customers for returned merchandise $118. The returned merchandise had cost $100.
31		Sold merchandise on account for $1,280, terms n/30. The cost of the merchandise sold was $814.

Journalize the transactions using a perpetual inventory system. Also, Post the transactions to T-accounts. Be sure to enter the beginning cash and common stock balances. Also, Prepare an income statement through gross profit for the month of May 2022. Lastly, Calculate the profit margin and the gross profit rate. (Assume operating expenses were $1,554.

Answer 1

Date	Particulars	Debit	Credit
		Amount ($)	Amount ($)
May-01	Purchases	8100
	To Accounts Payable - Black Wholesale Supply		8100
May-02	Accounts Receivable	4500
	To Sales		4500
May-05	Accounts Payable - Black Wholesale Supply	200
	To Purchase return		200
May-09	Bank	4410
	Sales Discount	90
	To Accounts Receivable		4500
May-10	Accounts Payable - Black Wholesale Supply	7821
	To Purchase Discount	79
	To Bank		7900
May-11	Supplies	900
	To Cash		900
May-12	Purchases	3100
	To Cash		3100
May-13	Cash	230
	To Purchase return		230
May-17	Purchases	2500
	To Accounts Payable - Wilhelm Distributors		2500
May-19	Freight	250
	To Cash		250
May-24	Accounts Receivable	5500
	To Sales		5500
May-25	Purchases	800
	To Accounts Payable - Clasps Inc		800
May-27	Accounts Payable - Wilhelm Distributors	2500
	To Purchase Discount		50
	To Bank		2450
May-29	Sales return	118
	To Cash		118
May-31	Accounts Receivable	1280
	To Sales		1280

	Income Statement
	Sales	11280
	Less: Sales return	-118	11162
Less:	Purchases	14500
	Less: Purchase return	-430	-14070
Add:	Closing stock *		5756
			2848
Less:	Operating expenses		-1554
Less:	Supplies		-900
Less:	Sales discount		-90
Add:	Purchase discount		129
	Net profit		433
	Net profit margin = 433/11162 = 3.88%
*	Purchases	14070
Less:	COGS	-8314
	Closing stock	-5756

	Gross Profit
	Sales	11162
Less:	Cost of goods sold	-8314
	Gross profit	2848
	Gross profit %	25.52%