Question

missing a few answers

At the beginning of June, Circuit Country has a balance in inventory of $2,350. The following transactions occur during the month of June. June 2 Purchase radios on account from Radio World for $2,050, terms 2/15, n/45. June 4 Pay cash for freight charges related to the June 2 purchase from Radio World, $270. June 8 Return detective radios to Radio World and receive credit, $400. June 10 Pay Radio World in full. June 11 Sell radios to customers on account, $3,700, that had a cost of $2,550. June 18 Receive payment on account from customers, $2,700. June 20 Purchase radios on account from Sound Unlimited for $3,150, terms 2/10, n/30. June 23 Sell radios to customers for cash, $4,650, that had a cost of $2,950. June 26 Return damaged radios to Sound Unlimited and receive credit of $500. June 28 Pay Sound Unlimited in full. Problem 6-3B Part 2 2. Prepare the top section of the multiple-step income statement through gross profit for the month of June. > Answer is complete but not entirely correct. CIRCUIT COUNTRY Multiple-step Income Statement (partial) For the month of June Net Sales 8,350 Cost of Good Sold 5,500 Sales Discounts 1.000X Gross Profit OS 12,850

Answer 1

1. Please note that sales discount is zero.
2. Understand the difference between sales discount and cash discount, 1000 mentioned by you in the answer is cash discount and not sales discount.
3. Sales discount is what given at the time of sale itself, inorder to encourage sales volume.
4. Whereas cash discount is allowed inorder to encourage receipt of money at the earliest.
5. It may also be noted that receiving 2700 out of 3700 doesn't necessarily mean it is a cash discount but it may also be part payment.
6. So make necessary assumptions and solve the problems.