Clay pooll Hardwares is only hardware store in a remote area of northern Minneso

Question

Clay pooll Hardwares is only hardware store in a remote area of northern Minnesota. Some of Claypools tranactions during the current year are as followed:

Nov 5th Sold Lumber on account to Bemmidji Construction for $13,390. The inventory subsidary ledger shows the cost of the this merchandise was $9,105.

Nov 9th Purchased Tools on account from Owatonna Tool Company, $3,800.

Dec 5th Collected in cash the $13,390 account recivable from Bemidji Construction.

Dec 9th Paid the $3,800 owed to Owatonna Tool Company.

Claypools personnel counted the inventory on hand and determined its cost to be $182,080. The accounting records however, indicate inventory of 183,790 and a cost of goods sold of $695,222. The physcial count of inventory was observed by the company's auditors and is considered correct. (Inventory Shrinkage).

<2 Part question>

A. Prepare joural entries to record theses transactions and events in the accounting records of Claypool Hardware. (The company uses a Perpetual inventory system).

B. Prepare a partial income statement showing the companies Gross profit for the year. (Net Sales for the year amount to $1,024,900.

Explanation / Answer

1. tools a/c Dr 3800 to Cr purchases a/c 3800 2.cash a/c Dr 13390 to Cr account receivable 13390 3.loan a/c Dr 3800 to Cr cash a/c 3800 4.profit and loss a/c Dr 1710 to Cr abnormal loss of stock 1710 5.cash a/c Dr 695222 to Cr sales a/c 695222

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