Reference no: EM132470063
Problem - Sandhill Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Sandhill showed Cash of $5,500 and Owner's Capital of $5,500.
May 1 Purchased merchandise on account from Braun's Wholesale Supply $4,300, terms 2/10, n/30.
May 2 Sold merchandise on account $1,600, terms 1/10, n/30. The cost of the merchandise sold was $1,300.
May 5 Received credit from Braun's Wholesale Supply for merchandise returned $200.
May 9 Received collections in full, less discounts, from customers billed on sales of $1,600 on May 2.
May 10 Paid Braun's Wholesale Supply in full, less discount.
May 11 Purchased supplies for cash $350.
May 12 Purchased merchandise for cash $1,200.
May 15 Received refund for poor quality merchandise from supplier on cash purchase $200.
May 17 Purchased merchandise from Valley Distributors $1,100, FOB shipping point, terms 2/10, n/30.
May 19 Paid freight on May 17 purchase $170.
May 24 Sold merchandise for cash $3,200. The merchandise sold had a cost of $1,800.
May 25 Purchased merchandise on account from Lumley, Inc. $550, FOB destination, terms 2/10, n/30.
May 27 Paid Valley Distributors in full, less discount.29Made refunds to cash customers for defective merchandise $70. The returned merchandise had a fair value of $40.
May 31 Sold merchandise on account $1,000, terms n/30. The cost of the merchandise sold was $600.
Sandhill Hardware's chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 126 Supplies, No. 201 Accounts Payable, No. 301 Owner's Capital, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold.
Required -
1. How do you Journalize the transactions using a perpetual inventory system?
2. How do you Enter the beginning cash and capital balances and post the transactions?
3. How do you Prepare income statement through gross profit for the month of May 2020?