Record merchandising transactions, prepare financial statements, and calculate gross profit ratio: perpetual inventory system. (LO 1,2,4,6)
At the beginning of February, Ace Distribution Company Inc. started with a contribution of $10,000 cash in exchange for common stock from its shareholders. The company engaged in the following transactions during the month of February.
| February 2 | Purchased merchandise on account from Enter Supply Co. for $7, 100, terms 2/ 10, n/45 |
| February 5 | Sold merchandise on account to Exit Company for $6,000, terms 2/10, n/30 and FOB destination. The cost of the merchandises old was 94,500. |
| February 6 | Paid $100 freight on the sale to Exit Company |
| February 8 | Received credit from Enter Supply Co. for merchandise returned for $500 |
| February 10 | Paid Enter Supply Co. in full |
| February 12 | Received payment from Exit Company for sale made on February 5 |
| February 14 | Purchased merchandise for cash for $5,200 |
| February 16 | Received refund from supplier for returned merchandise on February 14 cash purchase of $350 |
| February 17 | Purchased merchandise on account from In ware Distributors for $3.800. terms 1/10. n/30 |
| February 18 | Paid $250 freight on February 17 purchase |
| February2 1 | Sold merchandise for cash for $10,350. The cost of the merchandise sold was $8,200. |
| February 24
| Purchased merchandise for cash for $2,300 |
| February 25 | Paid In ware Distributors for purchase on February 17 |
| February 27 | Gave refund of $200 to customer from February 2I.The cost of the returned merchandise was $135. |
| February 28 | Sold merchandise of $3,000 on account with the terms 2/10, n/30. The merchandise cost $2.300. |
Required
a. Enter each transaction into the accounting equation, assuming Ace Distribution Company 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 balance in the inventory account at the end of February.
c. Prepare the four financial statements (including multiple-step income statement) for the month of February.
d. Calculate the gross profit ratio.
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