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Fairway Pro Shop - Journal entries and income statement

At the beginning of the current season on April 1, the ledger of Fairway Pro Shop showed Cash $2,500; Merchandise Inventory $3,500; and Common Stock $6,000. The following transactions were completed during April 2007

Apr. 5 Purchased golf bags, clubs, and balls on account from Kokott Co. $1,800 terms
3/10, n/60.

7 Paid freight on Kokott purchase $80
9 Received credit from Kokott Co. for merchandise returned $200.
10 Sold merchandise on account to members $910, terms n/30. The merchandise sold had a cost of $620
12 Purchased golf shoes, sweaters, and other accessories on account from Eagle Sportswear $730, terms 1/10, n/30
14 Paid Kokott Co. in full
17 Received credit from Eagle Sportswear for merchandise returned $30
20 Made sales on account to members $840, terms n/30. The cost of the merchandise sold was $550
21 Paid Eagle Sportswear in full
27 Granted an allowance to members for clothing that did not fit properly $60
30 Received payments on account from members $1,100

The chart for the accounts for the pro shop includes Cash, Accounts Receivable, Merchandise Inventory, Accounts Payable, Common Stock, Sales, Sales Returns and Allowances, and Cost of Goods Sold

(a) Journalize the April transactions using a perpetual inventory system.
(b) Using T accounts, enter the beginning balances in the ledger accounts and post the April transactions.
(c) Prepare a trial balance on April 30, 2007.
(d) Prepare an income statement through gross profit.

Solution Summary

The solution explains the journal entries for transactions undertaken by Fairway Pro Shop, posting to ledger, preparing a trial balance and the preparation of financial statements