Question

Problem 5-5A Piper Specialty Store Ltd. completed the following merchandising transactions in the month of May 2018. At the beginning of May, Piper Specialty Store’s ledger showed Cash $7,400; Accounts Receivable $1,600; Inventory $3,100; Common Shares $8,700; and Retained Earnings $3,400. Piper Specialty Store uses a perpetual inventory system. May 1 Purchased merchandise on account from Depot Wholesale Supply Ltd. for $6,200, terms 1/10, n/30, FOB shipping point. 3 Freight charges of $140 were paid by the appropriate party on the merchandise purchased on May 1. 4 Sold merchandise on account to Yip Company for $3,100, terms 2/10, n/30, FOB destination. The cost of the merchandise was $2,100. 7 Freight charges of $70 were paid by the appropriate party on the May 4 sale. 8 Received a $200 credit from Depot Wholesale Supply when merchandise was returned. 9 Paid Depot Wholesale Supply in full. 11 Purchased supplies for $400 cash. 14 Received payment in full from Yip Company for merchandise sold on account on May 4. 15 Collected $1,100 of the accounts receivable outstanding at the beginning of the month. All accounts were originally sold on terms of n/30, with no sales discounts. 18 Purchased merchandise from Harlow Distributors Inc. for $2,000, terms n/30, FOB destination. 21 Freight of $40 was paid by the appropriate party on the May 18 purchase of merchandise. 22 Sold merchandise to various customers for $7,200 cash. The cost of the merchandise was $3,900. 29 Paid a $100 cash refund to customers for returned merchandise. The cost of the returned merchandise was $60. It was restored to inventory. 31 A physical inventory count was taken and determined that there was $4,800 of inventory on hand. Prepare any adjustment required.

Record the May transactions. Set up T accounts, enter the opening balances, and post the transactions. Prepare a partial multiple-step income statement for the month ended May 31, through to gross profit. prepare the current assets section of the statement of financial position as at May 31

Answer 1

Piper Specialty Store Ltd Calculation Debit Credit Date Account $ 1-May Inventory 6,200 Accounts Payable $6,200 |(To record goods purchased on account) $ Buyer pays freight on FOB shipping point 3-May Inventory 140 $ Cash 140 |(To record payment of freight on goods purchased) $ 4-May Accounts Receivable 3,100 $ Sales 3,100 (To record sales on account) $ 4-May Cost of goods sold 2,100 $ Inventory 2,100 (To record cost) 7-May No entry Seller pays freight on FOB destination $ 8-May Accounts Payable 200 Inventory |(To record purchase returns) 200 terms 1/10, n/30 means 1 % discount if $ 9-May Accounts Payable 6,000 6,200-200 Cash paid within 10 days or else full invoice to 5,940 be paid within 30 days. 606,000 1% $ Inventory (To record cash paid to Depot Wholesale Supply Ltd) $ 11-May Supplies 400 $ Cash 400 (To record supplies purchased) $ 14-May Cash 3,038 $ Sales discounts 62. 3,100*2% $ Accounts Receivable 3,100 (To record cash received from Yip Company) $ 15-May Cash 1,100 Accounts Receivable 1,100 |(To record cash received from beginning accounts receivable outstanding) $ 18-May Inventory 2,000 $ 2,000 Accounts Payable (To record goods purchased on account) 21-May No entry Seller pays freight on FOB destination $ 22-May Cash 7,200 $ Sales 7,200 (To record sales for cash) $ 22-May Cost of goods sold 3,900 $ Inventory 3,900 (To record cost) $ 29-May Sales Returns and Allowances 100 $ Cash 100 (To record cash paid for sales returns) $ 29-May Inventory 60 Cost of goods sold $ 60 (To record cost of the returned merchandise & restored to inventory) $ 31-May Cost of goods sold 440 -5,240-4,800 $ Inventory 440 (To record inventory written off)

Piper Specialty Store Ltd T Accounts Date Date Date Date Credit Credit Debit Debit Credit Debit Credit Debit Date Date Date Date Cash Accounts Receivable Inventory Supplies $ $ 7,400 14-May 3,100 Op bal 15-May 1,100 4-May 2,100 Op bal Op bal 3-May $ 9-May 5,940 11-May $ 29-May $ 140 Op bal $ 1,600 $3,100 1-May 6,200 3-May $ 18-May 2,000 29-May $ 14-May 3,038 8-May $ 9-May $ 22-May 3,900 31-May $ 4-May 3,100 11-May $ 200 400 15-May 1,100 22-May 7,200 400 140 60 100 60 440 $ 4,800 Retained Earnings $12,158 $ $ Bal. Bal. Bal. Bal. 500 400 Accounts Payable Common Shares Op bal 8-May $ 9-May 6,000 200 Op bal $ $8,700 Op bal 3,400 1-May 6,200 18-May 2,000 $ 8,700 Bal. $ 2,000 Bal. Bal. $ 3,400 Sales discounts Sales Sales Returns and Allowances Cost of goods sold 29-May $ 4-May 3,100 22-May 7,200 4-May 2,100 22-May 3,900 31-May $ 14-May $ 29-May $ 62 100 60 440 Bal. $ 6,380 $10,300 Bal. $ $ Bal. Bal. 62 100

Piper Speciality Store Ltd TB Credit Debit Account Names Cash 12,158 Accounts Receivable 500 Inventory 4,800 Supplies 400 Accounts Payable 2,000 Common Shares 8,700 Retained Earnings 3,400 Sales 10,300 Sales discounts 62 Sales Returns and Allowances 100 Cost of goods sold 6,380 Totals 24,400 24,400

Piper Specialty Store Ltd
Income Statement
For the month ended May 31
Sales	10,300
Sales discounts	(62)
Sales Returns and Allowances	(100)
Net Sales		10,138
Cost of goods sold		6,380
Gross Profit		3,758

Piper Specialty Store Ltd
Balance Sheet
As of May 31
Assets
Current Assets
Cash	12,158
Accounts Receivable	500
Inventory	4,800
Supplies	400
Total Current Assets	17,858