Question

At the beginning of the current season on 1 April, the ledger of Tri-State Pro Shop showed Cash $2 500; Inventory $3 500; and Graham Woods, Capital $6 000. These transactions occurred during April 2012.

April	5	Purchased golf bags, clubs, and balls on account from Balata Company $1 700, FOB delivery point, terms 2/10, n/60.
	7	Paid freight on Balata purchase $80.
	9	Received credit from Balata Company for inventory returned $200.
	10	Sold inventory on account to members $950, terms n/30.
	12	Purchased golf shoes, sweaters, and other accessories on account from Arrow Sportswear $660, terms 1/10, n/30.
	14	Paid Balata Company in full.
	17	Received credit from Arrow Sportswear for inventory returned $60.
	20	Made sales on account to members $700, terms n/30.
	21	Paid Arrow Sportswear in full.
	27	Granted credit to members for clothing that did not fit properly $75.
	30	Received payments on account from members $1 100.

The chart of accounts for the pro shop includes Cash; Accounts Receivable, Inventory; Accounts Payable; Graham Woods, Capital; Sales; Sales Returns and Allowances; Purchases; Purchase Returns and Allowances; Discount Received; and Freight-in.

Instructions:

(a) Journalise the April transactions using a periodic inventory system.

(b) Using T accounts, enter the beginning balances in the ledger accounts and post the April transactions.

(c) Prepare a trial balance on 30 April 2012.

(d) Prepare an income statement through gross profit, assuming inventory on hand as at 30 April is $4 524.

Answer 1