Reference no: EM132840357
Problem 1 - At the beginning of the current tennis season, on April 1, 2021, Monty Tennis Shop's inventory consisted of 50 tennis racquets at a cost of $42 each. Monty uses a perpetual inventory system and the earnings approach. The following transactions occurred in April:
Apr. 2 Purchased 160 additional racquets from Roberts Inc. for $6,720, terms n/30.
Apr. 4 Determined that five of the racquets purchased on April 2 were damaged and returned them to Roberts Inc. Roberts Inc. credited Monty's account.
Apr. 5 Sold 45 racquets to Tennis Dome for $135 each, terms n/30.
Apr. 6 Tennis Dome returned 15 of the racquets after determining it had purchased more racquets than it needed. Monty gave Tennis Dome a credit on its account and returned the racquets to inventory.
Apr. 10 Sold 40 racquets at $135 each to cash customers.
Apr. 12 Ten of these racquets were returned for cash. The customers claimed they never play tennis and had no idea how they had been talked into purchasing the racquets. Refunded cash to these customers and returned the racquets to inventory.
Apr. 17 An additional 10 of the racquets sold on April 10 were returned because the racquets were damaged. The customers were refunded cash and the racquets were sent to a local recycler.
Apr. 25 Sold 60 racquets to the Summer Club for $135 each, terms n/30.
Apr. 29 Summer Club returned 25 of the racquets after the tennis pro had examined them and determined that these racquets were of inferior quality. Monty gave Summer Club a credit and decided to return the racquets to inventory with plans to sell them for the reduced price of $75 each.
Required -
1) Record the transactions for the month of April for Monty.
2) Post the opening balance and April's transactions, and calculate the April 30 balances.
Problem 2 - An alphabetical list of Sandhills Company adjusted accounts at its fiscal year end, August 31, 2021, follows. All accounts have normal balances.
Accounts payable $15,550 Notes payable $42,000
Accumulated depreciation-equipment 14,000 Prepaid insurance 575
Accumulated depreciation-furniture 17,500 R. Smistad, capital 65,750
Cash 19,390 R. Smistad, drawings 80,000
Cost of goods sold 271,800 Rent expense 24,900
Depreciation expense 7,080 Salaries expense 50,800
Equipment 35,000 Salaries payable 2,250
Furniture 42,000 Sales 472,000
Insurance expense 3,575 Sales returns and allowances 16,300
Interest expense 2,170 Supplies 950
Interest payable 565 Supplies expense 6,325
Merchandise inventory 71,350 Unearned revenue 2,600
Additional information -
1. Of the notes payable, $6,100 becomes due on February 17, 2022. The balance is due in 2023.
2. On July 18, 2021. R. Smistad invested $3,800 cash in the business.
Required -
1. Prepare a multiple-step income statement.
2. Prepare a statement of owner's equity.
3. Prepare a classified balance sheet.
4. Calculate the gross profit margin and profit margin.