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 $6,900; Accounts Receivable $1,400; Inventory $3,100; Common Shares $8,200; and Retained Earnings $3,200. Piper Specialty Store uses a perpetual inventory system. May 1 3 4 7 8 9 11 14 15 18 21 22 29 31 Purchased merchandise on account from Depot Wholesale Supply Ltd. for $5,400, terms 1/10, n/30, FOB shipping point. Freight charges of $140 were paid by the appropriate party on the merchandise purchased on May 1. 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. Freight charges of $100 were paid by the appropriate party on the May 4 sale. Received a $200 credit from Depot Wholesale Supply when merchandise was returned. Paid Depot Wholesale Supply in full. Purchased supplies for $500 cash. Received payment in full from Yip Company for merchandise sold on account on May 4. 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. Purchased merchandise from Harlow Distributors Inc. for $1,800, terms n/30, FOB destination. Freight of $50 was paid by the appropriate party on the May 18 purchase of merchandise. Sold merchandise to various customers for $6,200 cash. The cost of the merchandise was $4,300. Paid a $100 cash refund to customers for returned merchandise. The cost of the returned merchandise was $60. It was restored to inventory. A physical inventory count was taken and determined that there was $3,600 of inventory on hand. Prepare any adjustment required.

Record the May transactions in Journal.

Set up T accounts, enter the opening balances, and post the transactions. ( ledger)

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. (List Current assets in order of liquidity.)

Answer 1

Credit Calculation Piper Specialty Store Ltd Date Account 1-May Inventory Accounts Payable (To record goods purchased on account) Debit $ 5,400 $ 5,400 Buyer pays freight on FOB shipping po 3-May Inventory $ 140 Cash (To record payment of freight on goods purchased) $ 140 $ 3,100 4-May Accounts Receivable Sales (To record sales on account) $ 3,100 $ 2,100 4-May Cost of goods sold Inventory (To record cost) $ 2,100 7-May No entry Seller pays freight on FOB destination $ 200 8-May Accounts Payable Inventory (To record purchase returns) $ 200 9-May Accounts Payable $ 5,200 Cash Inventory (To record cash paid to Depot Wholesale Supply Ltd) $ $ 5400 - 200 5,148 52 5200 * 1% terms 1/10, n/30 means 1% discount if paid within 10 days or else full invoice to be paid within 30 days. $ 500 11-May Supplies Cash (To record supplies purchased) $ 500 $ $ 3,038 62 3100 * 2% 14-May Cash Sales discounts Accounts Receivable (To record cash received from Yip Company) $ 3,100 15-May Cash $ 1,100 Accounts Receivable $ 1,100 (To record cash received from beginning accounts receivable outstanding) $ 1,800 18-May Inventory Accounts Payable (To record goods purchased on account) $ 1,800 21-May No entry Seller pays freight on FOB destination $ 6,200 22-May Cash Sales (To record sales for cash) $ 6,200 $ 4,300 22-May Cost of goods sold Inventory (To record cost) $ 4,300 $ 100 29-May Sales Returns and Allowances Cash (To record cash paid for sales returns) $ 100 29-May Inventory $ 60 Cost of goods sold $ 60 (To record cost of the returned merchandise & restored to inventory) $ 248 3848 - 3600 31-May Cost of goods sold Inventory (To record inventory written off) $ 248

Credit Piper Specialty Store Ltd T Accounts Date Debit Date Credit Cash Op bal $ 6,900 3-May $ 140 14-May $ 3,038 9-May $ 5,148 15-May $ 1,100 11-May $ 500 22-May $ 6,200 29-May $ 100 Date Debit Date Credit Accounts Receivable Op bal $ 1,400 14-May $ 3,100 4-May $ 3,100 15-May $ 1,100 Date Debit Date Credit Inventory Op bal $ 3,100 4-May $ 2,100 1-May $ 5,400 8-May $ 200 3-May $ 140 9-May $ 52 18-May $ 1,800 22-May $ 4,300 29-May $ 60 Date Debit Date Supplies Op bal $ 11-May $ 500 Bal. $ 11,350 Bal. $ 300 Bal. $ 3,848 Bal. $ 500 31-May $ 248 Bal. Common Shares Op bal $ 3,600 Retained Earnings Op bal $ 8,200 $3,200 Accounts Payable 8-May $ 200 Op bal $ . 9-May $ 5,200 1-May $ 5,400 18-May $ 1,800 $ 8,200 Bal. $ 1,800 Sales 4-May $ 3,100 22-May $ 6,200 Bal. Sales discounts 14-May $ 62 Bal. $ 3,200 Sales Returns and Allowances 29-May $ 100 60 Cost of goods sold 4-May $ 2,100 29-May $ 22-May $ 4,300 31-May $ 248 Bal. $ 9,300 Bal. $ 62 Bal. $ 100 Bal. $ 6,588

Piper Specialty Store Ltd Income Statement For the month ended May 31 Sales Sales discounts Sales Returns and Allowances Net Sales Cost of goods sold Gross Profit 9,300 (62) (100) 9,138 6,588 2,550

Piper Specialty Store Ltd Balance Sheet As of May 31 Assets Current Assets Cash Accounts Receivable Inventory Supplies Total Current Assets 11,350 300 3,600 500 15,750