At the beginning of July, CD City has a balance in inventory of $3,100. The foll
ID: 2529295 • Letter: A
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.
Explanation / Answer
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
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
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
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