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 3Purchased merchandise on account from Thompson Supply Co. for $5,000, terms 1/10, n/30

April 4Sold merchandise on account to Brown Company for $3,500, terms 2/10, n/30. The cost of the merchandise sold was $1,500.

April 7Paid $100 freight on the sale to Brown Company

April 8Received credit from Thompson Supply Co. for merchandise returned for $500

April 10 Paid Thompson Supply Co. in full

April 15 Received payment from Brown Company for sale made on April 4

April 16 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

April 21 Sold merchandise for cash for $12,170. The cost of the merchandise sold was $9,500.

April 24 Purchased merchandise for cash for $5,300

April 25 Paid Kelsey Distributors for purchase on April 19

April 27 Gave refund of $800 to customer from April 21. 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.

Requirements

1. 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.

2. Calculate the balance in the inventory account at the end of April.

3. Prepare a multistep income statement for the month of April and a balance sheet at April 30.

4. Calculate the gross profit ratio.