Waters Hardware Store completed the following merchandising transactions in the
ID: 2484700 • Letter: W
Question
Waters Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, Water’s ledger showed Cash of $11,291 and Common Stock of $11,291.
Sold merchandise on account for $1,807, terms n/30. The cost of the merchandise sold was $1,171.
a) Journalize the transactions using a perpetual inventory system.(Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)
b) Post the transactions to T-accounts. Be sure to enter the beginning cash and commo stock balances. (Post entries in the order of journal entries posted in part 1.)
c) Prepare an income statement through gross profit for the month of May 2014.
May 1 Purchased merchandise on account from Hauke Wholesale Supply for $8,200, terms 1/10, n/30. 2 Sold merchandise on account for $5,400, terms 2/10, n/30. The cost of the merchandise sold was $4,050. 5 Received credit from Hauke Wholesale Supply for merchandise returned $500. 9 Received collections in full, less discounts, from customers billed on May 2. 10 Paid Hauke Wholesale Supply in full, less discount. 11 Purchased supplies for cash $1,270. 12 Purchased merchandise for cash $4,375. 15 Received $325 refund for return of poor-quality merchandise from supplier on cash purchase. 17 Purchased merchandise from Friedrich Distributors for $3,400, terms 2/10, n/30. 19 Paid freight on May 17 purchase $353. 24 Sold merchandise for cash $7,763. The cost of the merchandise sold was $5,787. 25 Purchased merchandise from Fasteners Inc. for $1,129, terms 3/10, n/30. 27 Paid Friedrich Distributors in full, less discount. 29 Made refunds to cash customers for returned merchandise $131. The returned merchandise had cost $98. 31Sold merchandise on account for $1,807, terms n/30. The cost of the merchandise sold was $1,171.
Explanation / Answer
Journal entries Date Account titles Debit Credit 1-May Inventory 8,200 To Accounts payable 8,200 2-May Account receivable 5,400 to Sales 5,400 cost of goods sold 4,050 to inventory 4,050 5-May Accounts payable 500 to inventory 500 9-May Cash 5,292 Sales discount 108 to Account receviable 5,400 10-May Accounts payable 7,700 to inventory 77 to cash 7,623 11-May supplies 1,270 to cash 1,270 12-May inventory 4,375 to cash 4,375 15-May cash 325 to inventory 325 17-May inventory 3,400 to Accounts payable 3,400 19-May inventory 353 to cash 353 24-May Cash 7,763 to sales 7,763 Cost of goods sold 5,787 to inventory 5,787 25-May Inventory 1,129 to accounts payable 1,129 27-May Accounts payable 3,400 To inventory 68 to cash 3,332 29-May sales return 131 to cash 131 inventory 98 to cost of goods sold 98 31-May Account receivable 1,807 to sales 1,807 Cost of goods sold 1,171 to inventory 1,171 T- accounts Cash Debit Credit opening bal 11,291 10-May 7,623 9-May 5,292 11-May 1,270 15-May 325 12-May 4,375 24-May 7,763 19-May 353 27-May 3,332 29-May 131 balance 7,587 inventoey a/c Debit Credit 1-May 8,200 2-May 4,050 12-May 4,375 5-May 500 17-May 3,400 10-May 77 19-May 353 15-May 325 25-May 1,129 24-May 5,787 29-May 98 27-May 68 31-May 1,171 balance 5,577 Accounts payable a/c date Debit Credit 5-May 500 1-May 8,200 10-May 7,700 17-May 3,400 27-May 3,400 25-May 1,129 balance 1,129 Accounts receivable Debit Credit 2-May 5,400 9-May 5,400 31-May 1,807 balance 1,807 cost of goods sold Debit Credit 2-May 4,050 29-May 98 24-May 5,787 31-May 1,171 balance 10,910 Sales Debit Credit - - 2-May 5,400 24-May 7,763 31-May 1,807 Balance 14,970 Sales return Debit Credit 29-May 131 Balance 131 Sales discount Debit Credit 9-May 108 balance 108 supplies Debit Credit 11-May 1,270 Balance 1,270 Common stock Debit Credit opening 11,291 Balance 11,291 income statement Sales 14,970 less: sales return -131 sales discount -108 Net sales 14,731 less:cost of goods sold -10,910 Gross profit 3,821
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