Record merchandising transactions and prepare multi-step financial statement: perpetual inventory system (LO 1, 2,4,6)
The following transactions occurred during March 2007 at the Five Oaks Tennis Club.
|
3-Mar |
Purchased racquets and balls on credit from Spaulding Company for $700. with terms 3/05, n/30 |
|
4-Mar |
Paid freight of $50 on the March 3 purchase |
|
6-Mar |
Sold merchandise to members on credit for $400, terms n/30.The merchandises old cost $300. |
|
10-Mar |
Received credit of $40 from Spaulding for a damaged racquet that was returned |
|
11-Mar |
Purchased tennis shoes from Reebok for cash for $3,000 |
|
13-Mar |
Paid Spaulding Company in full |
|
14-Mar |
Purchased tennis shirts and shorts from Nike Sportswear on credit for $5,000, terms 2/10, n/14 |
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15-Mar |
Received credit of $50 from Nike Sportswear for damaged merchandise |
|
18-Mar |
Sold merchandise to member so n account,$ 950, terms n/30. The cost of the merchandises old was |
|
22-Mar |
Received $650 in cash payment on account from members |
|
24-Mar |
Paid Nike Sportswear in full |
|
26-Mar |
Granted an allowance of $30 to members for tennis clothing that faded when washed. (Customers) |
|
30-Mar |
Received $320 in cash payments on account from members |
|
30-Mar |
Paid cash operating expenses of $300 for the month |
Required
a. Suppose the Five Oaks Tennis Club started the month with cash of $8,000, merchandise inventory of $2,000, and common stock of $10,000. Enter each transaction into the accounting equation, assuming Five Oaks Tennis Club uses a perpetual inventory system.
b. Calculate the cost of goods sold for March and the ending balance in inventory.
c. Prepare the multiple-step income statement, and the statement of changes in shareholders’ equity for the month of March, and the balance sheet at March 31.
d. Calculate the gross profit ratio for Five Oaks. Explain what the ratio measures.