Hardwood Lumber is a lumber yard block island. Some of Hardwood\'s transactions

Question

Hardwood Lumber is a lumber yard block island. Some of Hardwood's transactions during the current year are as follows: Mar. 3- Sold lumber on account to Delt Construction, $17,200. The inventory subsidiary ledger shows the cost of this merchandise was $11,150. Mar. 7- Purchased lumber on account from PHL Company, $4,100. Apr. 4- Collected in cash the $8,350 account receivable from Delt Construction. Apr. 10- Paid the $4,100 owed to PHL Company. Dec. 31- Hardwood's personnel counted the inventory on hand and determined its cost to be $105,000. The accounting records, however, indicate inventory of $106,500 and a cost of goods sold of $703,000. The physical count of the inventory was observed by the company's auditors and is considered correct. 1. Prepare journal entries to record these transactions and events in the accounting records of Hardwood Lumber. (The company uses a perpetual inventory system.) 2. Prepare a partial income statement showing the company's gross profit for the year. (Net sales for the year amount to $1,322,000.)

Explanation / Answer

3 Mar Acct Rxable Dr 17200 Sales Cr 17200 3 Mar Cost of goods sold Dr 11,150 Merchandise inventory Cr 11,150 7 Mar Merchandise inventory Dr 4100 Acct Payable Cr 4100 4 Apr Cash Dr 8350 Acct Rxable Cr 8350 10 Apr Acct Payable Dr 4100 Cash Cr 4100 Dec 31 Cost of Goods Sold Dr 703,000 Merchandise Inventory Dr 105,000 Purchases Cr 701,500 Merchandise Inventory Cr 106,500 Partial Income Statement: Sales $1322,000 Less COGS $703,000 ------------------------ Gross Profit 619,000

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