Question

The Tourist Shop sells souvenirs at various locations along the Florida Gulf Coast. During May and June, the company experienced the following events related to t-shirt sales:

May

1. Purchased inventory for $2,400 on account.
2. Sold 350 units of inventory for $15 each.
3. Paid suppliers $3,000.

June

4. Purchased inventory for $3,600 on account.
5. Sold 500 units for $15 each.

Related to inventory, The Tourist Shop also recorded the following:

Apr. 30	Ending balance 200 units @ $7	= $1,400
May. 15	Purchased 300 units @ $8	= $2,400
June 5	Purchased 400 units @ $9	= $3,600

The Tourist Shop had the following account balances at April 30:

Accounts payable	$ 2,400
Cash	10,000
Common stock	5,000
Inventory	1,400
Retained earnings	4,000

Required:

1. Add labels to the first blank line in the horizontal statements model to reflect the components of each statement: Assets, Expenses, Liabilities, Net Income, Revenue, and Stockholder’s Equity.
2. Add the account titles to the third blank link, grouping them according to the appropriate component of each statement. Add the beginning account balances in the space provided
3. Record the transactions above in the horizontal statements model provided. The Tourist Shop uses the FIFO method.

What is the total amount of gross profit that The Tourist Shop will report for May and June?

Answer 1

horizontal statements model and monthly gross profit :
Trans. Date	Assets		=	Liabilities +	Shareholders' Equity
	Cash +	Inventory	=	Accs pay	Comm stock	Retain. earnings	=	Revenue-Expenses
Op. Bal. on April 30	10000	1400	=	2400	5000	4000
Purchase May 15		2400	=	2400
Sales May 31 (350*15)	5250		=					5250
COGS May 31 (200*7 + 150*8)		-2600	=					-2600
Payment May 31	-3000		=	-3000
May - Gross Profit			=			2650	=	2650
Purchase June 5		3600	=	3600
Sales June 30 (500*15)	7500		=					7500
COGS June 30 (150*8 + 350*9)		-4350	=					-4350
June - Gross Profit						3150	=	3150
Balance	19750	450	=	5400	5000	9800
Grand Balance on June 30		20200	=	20200