Record merchandising transactions and prepare single-step and multiple-step income statement perpetual inventory system.(LO 1, 2, 4,6)
FOXX Supplier Inc. sells plant food to retail landscaping and gardening stores. At the beginning of May, FOXX Supplier had a $15,000 balance in cash and $15,000 in common stock. During the month of May, the following transactions took place
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May 3 |
Purchased 500 pounds of plant food on account from the manufacturer for $20 per pound. The terms were 1/10, n/30, FOB shipping point. Freight costs were $90. |
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May 6 |
Sold 50 pounds of plant food to Center Street Garden Supply for $35 per pound on account, with terms 2110, n/30, FOB destination’ Freight costs were $15. |
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May 10 |
Paid the manufacturer for the May 3 purchase |
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May 15 |
Received payment in full from Center Street Garden Supply |
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May 17 |
Sold 200 pounds of plant food to Perry’s Plants on account for $34 per pound, with terms I/10, n130, FOB shipping point. Freight costs were $100. |
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May 19 |
Returned 10 pounds of spoiled plant food to the manufacturer and received cash payment of $20 per pound |
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May 20 |
Purchased 300 pounds of plant food on account from the manufacturer for $20 per pound. Terms were n/30, FOB destination. Freight costs were $50. |
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May 24 |
Sold 150 pounds of plant food to Sam’s Pest Control for $24 each for cash. Sam’s picked up the order, so there were no shipping costs. |
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May 31 |
Paid for the purchase on May 20 |
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May 3 1 |
Declared and paid cash dividends of $ 150 |
Required
a. Enter each transaction into the accounting equation, assuming FOXX Supplier Inc. uses a perpetual inventory system. Start with the opening balances in cash and common stock described at the beginning of the problem’
b. Calculate the cost of goods sold for May 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 May, and the balance sheet at May 3 1.
d. Calculate the gross profit ratio for FOXX Supplier. Explain what the ratio measures.