Question

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 2/10, n/30. The cost of the merchandise sold was $1,500.
April 7 Paid $100 freight on the sale to Brown Company
April 8 Received 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.



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  • CreatedSeptember 01, 2014
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