At the beginning of July, CD City has a balance in inventory of $3,400. The following transactions occur during the month of July.
July 3 Purchase CDs on account from Wholesale Music for $2,300, terms 1/10, n/30.
July 4 Pay freight charges related to the July 3 purchase from Wholesale Music, $110.
July 9 Return incorrectly ordered CDs to Wholesale Music and receive credit, $200.
July 11 Pay Wholesale Music in full.
July 12 Sell CDs to customers on account, $5,800 that had a cost of $3,000.
July 15 Receive full payment from customers related to the sale on July 12.
July 18 Purchase CDs on account from Music Supply for $3,100, terms 1/10, n/30.
July 22 Sell CDs to customers for cash, $4,200, that had a cost of $2,500.
July 28 Return CDs to Music Supply and receive credit of $300.
July 30 Pay Music Supply in full.
1. Assuming that CD City uses a perpetual inventory system, record the transactions.
2. Prepare the top section of the multiple-step income statement through gross profit for the month of July.