Question

In: Accounting

July 3 Purchase CDs on account from Wholesale Music for $2,050, terms 2/10, n/30. July 4...

July 3 Purchase CDs on account from Wholesale Music for $2,050, terms 2/10, n/30.
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.

Required:

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.) ONLY need for JULY 11st.

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

Solutions

Expert Solution

1.

Date Account titles Debit Credit
Jul-03 Inventory $                 2,050
     Accounts Payable $             2,050
(Purchased inventory on account)
Jul-04 Inventory $                    120
      Cash $                120
(Paid freight on purchase of inventory)
Jul-09 Accounts Payable $                    200
      Inventory $                200
(Return of incorrectly ordered inventory)
Jul-11 Accounts Payable $                 1,850 =2050-200
      Cash $             1,813 =1850*98%
      Inventory $                  37 =1850*2%
(Paid cash net of discount)
Jul-12 Accounts Receivable $                 5,300
       Sales Revenue $             5,300
(Sales of units on account)
Cost of Goods Sold $                 2,750
      Inventory $             2,750
(Cost taken out of inventory for sales)
Jul-15 Cash $                 5,300
    Accounts Receivable $             5,300
(Received cash)
Jul-18 Inventory $                 2,850
     Accounts Payable $             2,850
(Purchased inventory on account)
Jul-22 Cash $                 3,950
       Sales Revenue $             3,950
(Sales of units for cash)
Cost of Goods Sold $                 2,250
      Inventory $             2,250
(Cost taken out of inventory for sales)
Jul-28 Accounts Payable $                    250
      Inventory $                250
(Return of incorrectly ordered inventory)
Jul-30 Accounts Payable $                 2,600 =2850-250
      Cash $             2,548 =2600*98%
      Inventory $                  52 =2600*2%
(Paid cash net of discount)

2.

Income Statement
Sales Revenue $                 9,250 =5300+3950
Less Cost of Goods Sold $                 5,000 =2750+2250
Gross Profit $                 4,250

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