Reference no: EM131816623

QUESTION

Jordan footwear sells athletic shoes and uses the perpetual inventory system. During June, Jordan engaged in the following transactions in its first month of operations:

a. On June 1, Jordan purchased, on credit 100 pairs of basketball shoes and 210 pairs of running shoes with credit terms of 2/10, n/30. The basketball shoes were purchased at a cost of $85 per pair, and the running shoes were purchased at a cost of $60 per pair. Jordan paid Mole trucking $310 cash to transport the shoes from the manufacturer to Jordan's warehouse, shipping terms were F.O.B. shipping point, and the items were shipped on June 1 and arrived on June 4.

b. On June 2, Jordan purchased 88 pairs of cross training shoes for cash. The shoes cost Jordan $65 per pair.

c. On June 6, Jordan purchased 125 pairs of tennis shoes on credit. Credit terms were 2/10, n/25. The shoes were purchased at a cost of $45 per pair.

d. On June 10, Jordan paid for the purchase of the basketball shoes and the running shoes in transaction (a).

e. On June 12, Jordan determined that $585 of the tennis shoes were defective. Jordan returned the defective merchandise to the manufacturer.

f. On June 18, Jordan sold 50 pairs of basketball shoes at $116 per pair, 92 pairs of running shoes for $85 per pair, 21 pairs of cross training shoes for $100 per pair and 48 pairs of tennis shoes for $68 per pair. All sales were for cash. The cost of merchandise sold was $13,295.

g. On June 21, customers returned 10 pairs of the basketball shoes purchased on June 18. The cost of merchandise returned was $850.

h. On June 23, Jordan sold another 20 pairs of basketball shoes, on credit for $116 per pair and 15 pairs of cross-training shoes for $100 cash per pair. The cost of the merchandise sold was $2,675.

i. On June 30, Jordan paid for the June 6 purchase of tennis shoes less the return on June 12.

j. On June 30, Jordan purchased 60 pairs of basketball shoes on credit for $85 each. The shoes were shipped F.O.B. destination and arrived at Jordan on July 3.

REQUIRED

I. Analyze each transaction for June using the accounting equation.
II. Assuming operating expenses of $5,300 and income taxes of $365, prepare Jordan's income statement for June 2011.