Record merchandising transactions, prepare financial statements, and calculate gross profit ratio: perpetual inventory system. (LO 1, 2,4,6)
At the beginning of April, Morgan Parts Company Inc. started with a contribution of $20,000 cash in exchange for common stock from its shareholders. The company engaged in the following transactions during the month of April.
| April 3 | Purchased merchandise on account from Thompson Supply Co. for $5,000, terms 1/10, n/30 |
| April 4 | Sold merchandise on account to Brown Company for $3,500, terms |
| April 7 | 2/10,n/130. The cost of the merchandises old was 91,500. |
| April 8 | Paid $100 freight on the sale to Brown Company |
| April 10 | Received credit from Thompson Supply Co. for merchandise returned for $500 |
| April 15 | Paid Thompson Supply Co. in full |
| April 16 | Received payment from Brown Company for sale made on April 4 Purchased merchandise for cash for $3,200 |
| April 17 | Received refund from supplier for returned merchandise on April 16 cash purchase of $350 |
| April 19 | Purchased merchandise on account from Kelsey Distributors for $4,100, terms 2/10, n/30 |
| April 20 | Paid $350 freight on April 19 purchase |
| Apnl2l | Sold merchandise for cash for $12,110. The cost of the merchandise sold was for $9,500. |
| Apr1l24 | Purchased merchandise for cash for $5,300 |
| April 25 | Paid Kelsey Distributors for purchase on April 19 |
| Aprtl27 | Gave refund of $800 to customer from April 2l. The cost of the returned merchandise was $535. |
| April 30 | Sold merchandise of $2,000 on account with the terms 2/10, n/30. The merchandise cost $1,200. |
Required
a. Enter each transaction into the accounting equation, assuming Morgan Parts
Company 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 balance in the inventory account at the end of April.
c. Prepare the four financial statements (including multiple-step income statement) for the month of April. (Balance sheet at April 30.)
d. Calculate the gross profit ratio.
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