Question

Prepare a multiple-step income statement through the calculation of gross profit.
For each transaction, indicate the impact each item had on income and the dollar amount of the change in income, if any. Input decreases to net income as negative values. Upon completion, compare the gross profit with the amount reported on the partial income statement.
Jul. 1 Purchased merchandise from Boden Company for $6,000 under credit terms of 1/15, n/30,
FOB shipping point, invoice dated July 1.
Jul. 2 Sold merchandise to Creek Co. for $900 under credit terms of 2/10, n/60, FOB shipping point,
invoice dated July 2. The merchandise had cost $500.
Jul. 3 Paid $125 cash for freight charges on the purchase of July 1.
Jul. 8 Sold merchandise that had cost $1,300 for $1,700 cash.
Jul. 9 Purchased merchandise from Leight Co. for $2,200 under credit terms of 2/15, n/60, FOB
destination, invoice dated July 9.
Jul. 11 Received a $200 credit memorandum from Leight Co. for the return of part of the merchandise
purchased on July 9.
Jul. 12 Received the balance due from Creek Co. for the invoice dated July 2, net of the discount.
Jul. 16 Paid the balance due to Boden Company within the discount period.
Jul. 19 Sold merchandise that cost $800 to Art Co. for $1,200 under credit terms of 2/15, n/60, FOB
shipping point, invoice dated July 19.
Jul. 21 Issued a $200 credit memorandum to Art Co. for an allowance on goods sold on July 19.
Jul. 24 Paid Leight Co. the balance due after deducting the discount.
Jul. 30 Received the balance due from Art Co. for the invoice dated July 19, net of discount.
Jul. 31 Sold merchandise that cost $4,800 to Creek Co. for $7,000 under credit terms of 2/10, n/60,
FOB shipping point, invoice dated July 31.

Answer 1

Answer:

inventory  6,000 debit

     account payable 6,000 credit

--to record July 1st--

Acc Rec   900 debit

 Sales Revenues   900 credit (+900 income)

--to record sale--

COGS  500 debit (-500 expense)

  Inventory   500 credit

--to record cost of sale--

Delivery expense 125 debit (-125 expense)

   Cash                 125 credit

--to record freight-out --

Cash          1,700 debit

 Sales Revenues   1,700 credit (+1,700 income)

--to record sale--

COGS  1,300 debit (-1,300 expense)

  Inventory   1,300 credit

--to record cost of sale--

Inventory   2,200 debit

  Account Payable  2,200 credit

--to record purchase--

Account Payable 200 debit

   Inventory                200 credit

--to record return of goods--

Cash   882 debit

Sales DIscount 18 debit

   Accounts Receivables   900 credit

--to record payment from customer--

Account Payable 6,000 debit

    Cash                      5,940 credit

    Inventory                    60 credit

--to record payment to supplier--

Cash          1,200 debit

 Sales Revenues   1,200 credit (+1,200 income)

--to record sale--

COGS  800 debit (-800 expense)

  Inventory   800 credit

--to record cost of sale--

Sales Returns  200 debit

     Account Receivables  200 credit

-- to record return from customer--

Account Payable 2,000 debit

    Cash                      1,960 credit

    Inventory                    40 credit

--to record payment to supplier--

Cash   980 debit

Sales DIscount 20 debit

   Accounts Receivables 1,000 credit

--to record payment from customer--

Cash          7,000 debit

 Sales Revenues   7,000 credit (+7,000 income)

--to record sale--

COGS  4,800 debit (-4,800 expense)

  Inventory   4,800 credit

--to record cost of sale--

Explanation:

Cheek

900 x 2% = 18

net of discount 900 - 18 = 882

Boden:

6,000 x 1% = 60

Net of discount 6,000 - 60 = 5,940

Leight:

2,200 - 2,000 = 2,000 balance due

2,000 x 2% = 40

net of discount 1,960

Art Co:

1,200 - 200 = 1,000 balance due

1,000 x 2% = 20 discount

net = 1,000 - 20 = 980