Question

At the beginning of July, CD City has a balance in inventory of $3,100. The following transactions occur during the month of July. July 3 Purchase CDs on account from Wholesale Music for $2,000, terms 1/10, n/30. July 4 Pay cash for freight charges related to the July 3 purchase from Wholesale Music, $110. July 9 Return incorrectly ordered CDs to Wholesale Music and receive credit, $300. July 11 Pay Wholesale Music in full. July 12 Sell CDs to customers on account, $5,200, that had a cost of $2,700. July 15 Receive full payment from customers related to the sale on July 12. July 18 Purchase CDs on account from Music Supply for $2,800, terms 1/10, n/30. July 22 Sell CDs to customers for cash, $3,900, that had a cost of $2,200. July 28 Return CDs to Music Supply and receive credit of $240. July 30 Pay Music Supply in full.

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.)

Purchase CDs on account from Wholesale Music for $2,000, terms 1/10, n/30.

Pay cash for freight charges related to the July 3 purchase from Wholesale Music, $110.

Return incorrectly ordered CDs to Wholesale Music and receive credit, $300.

Pay Wholesale Music in full.

Sell CDs to customers on account, $5,200, that had a cost of $2,700. Record the sale of inventory on account.

Sell CDs to customers on account, $5,200, that had a cost of $2,700. Record the cost of inventory sold.

Receive full payment from customers related to the sale on July 12.

Purchase CDs on account from Music Supply for $2,800, terms 1/10, n/30

Sell CDs to customers for cash, $3,900, that had a cost of $2,200. Record the sale of inventory for cash.

Sell CDs to customers for cash, $3,900, that had a cost of $2,200. Record the cost of inventory sold.

Return CDs to Music Supply and receive credit of $240.

Pay Music Supply in full

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

Answer 1

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.)

Date	Journal	Debit	Credit
July 03	Inventory       Accounts payable	2,000	2,000
July 04	Inventory       Cash	110	110
July 09	Accounts payable       Inventory	300	300
July 11	Accounts payable       Cash	1,700	1,700
July 12	Accounts receivable        Sales revenue	5,200	5,200
July 12	Cost of goods sold        Inventory	2,700	2,700
July 15	Cash      Accounts receivable	5,200	5,200
July 18	Inventory      Accounts payable	2,800	2,800
July 22	Cash       Sales revenue	3,900	3,900
July 22	Cost of goods sold        Inventory	2,200	2,200
July 28	Accounts payable        Inventory	240	240
July 30	Accounts payable       Cash	2,560	2,560

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

CD CITY
Multiple-step Income Statement (partial)
For the month of July
Net sales	$9,100
Cost of goods sold	$4,900
Gross profit	$4,200