Krey Distributing Company completed these merchandising transactions in the month of April. At the beginning of April, the ledger of Krey showed Cash of $10,000 and Common Stock of $10,000.
Apr. 2 Purchased merchandise on account from Am-Bev Co. $8,700, terms 2/10, n/30.
4 Sold merchandise on account $6,000, terms 2/10, n/30. The cost of the merchandise sold was $3,700.
5 Paid $200 freight on April 4 sale.
6 Received credit from Am-Bev Co. for merchandise returned $400.
11 Paid Am-Bev Co. in full, less discount.
13 Received collections in full, less discounts, from customers billed on April 4.
14 Purchased merchandise for cash $4,700.
16 Received refund from supplier for returned merchandise on cash purchase of April 14, $500.
18 Purchased merchandise from Lohr Distributors $5,500, terms 2/10, n/30.
20 Paid freight on April 18 purchase $180.
23 Sold merchandise for cash $8,300. The cost of the merchandise sold was $5,580.
26 Purchased merchandise for cash $2,300.
27 Paid Lohr Distributors in full, less discount.
29 Made refunds to cash customers for returned merchandise $180. The returned merchandise had a cost of $120.
30 Sold merchandise on account $3,980, terms n/30. The cost of the merchandise sold was $2,500.
Krey Distributing Company’s chart of accounts includes Cash, Accounts Receivable,
Inventory, Accounts Payable, Common Stock, Sales Revenue, Sales Returns and Allowances, Sales Discounts, Cost of Goods Sold, and Freight-Out.
(a) Journalize the transactions.
(b) Post the transactions to T-accounts. Be sure to enter the beginning cash and common stock balances.
(c) Prepare the income statement through gross profit for the month of April 2014.
(d) Calculate the profit margin and the gross profit rate. (Assume operating expenses were $3,000.)