Question

Jasmine Corporation
 purchased inventory costing $125,000 and sold 75% of the goods for $163,750. All purchases and sales were on account. Jasmine later collected 25% of the accounts receivable. Assume that sales returns are nonexistent.

1. Journalize these transactions for Jasmine, which uses the perpetual inventory system.

2. For these transactions, show what Jasmine will report for inventory, revenues, and expenses on its financial statements
 at the end of the month. Report gross profit on the appropriate statement. Assume beginning inventory is $0.

Answer 1

1.

(Journal entries)

 

Inventory	125,000
Accounts Payable		125,000
Accounts Receivable	163,750
Sales Revenue		163,750
Cost of Goods Sold	93,750
Inventory ($125,000 × .75)		93,750
Cash ($163,750 × .25)	40,938
Accounts Receivable		40,938

 

2.

(Financial statements)

 

BALANCE SHEET
Current assets:
Inventory ($125,000 − $93,750)..............................	$ 31,250
INCOME STATEMENT
Sales revenue.................................................................	$163,750
Cost of goods sold..........................................................	93,750
Gross profit......................................................................	$70,000

Gross profit......................................................................

$70,000