Phantom Book Warehouse Ltd. distributes hardcover books to retail stores. At the end of May, Phantom's inventory consists of 250 books purchased at $18 each. Phantom uses a perpetual inventory system.
During the month of June, the following merchandise transactions occurred:
June 1 Purchased 180 books on account for $16 each from Reader's World Publishers, terms n/45.
3 Sold 220 books on account to The Book Nook for $25 each, with an average cost of $17, terms 2/10, n/45.
5 Received a $160 credit for 10 books returned to Reader's World Publishers.
8 Sold 80 books on account to Read-A-Lot Bookstore for $22 each, with an average cost of $17, terms 2/10, n/45.
9 Issued a $264 credit memorandum to Read-A-Lot Bookstore for the return of 12 damaged books. The books were determined to be no longer saleable and were destroyed.
11 Purchased 130 books on account for $15 each from Read More Publishers, terms n/45.
12 Received payment in full from The Book Nook.
17 Received payment in full from Read-A-Lot Bookstore.
22 Sold 125 books on account to Reader's Bookstore for $25 each, with an average cost of $17, terms 2/10, n/45.
25 Granted Reader's Bookstore a $375 credit for 15 returned books. These books were restored to inventory.
29 Paid Reader's World Publishers in full.
Instructions
(a) Is the Phantom Book Warehouse a retailer or a wholesaler? Explain.
(b) Record the June transactions. (Record transactions to the nearest dollar.)
(c) Create a T account for the Inventory account. Enter the opening balance, post the June transactions related to Inventory prepared in part (b), and determine the ending balance in the account.
(d) Determine the number of books Phantom has on hand on June 30. What is the average cost of these books on June 30? (Hint: Divide the ending balance in the Inventory account calculated in part (c) and divide it by the number of books on hand at June 30. Round your answer to the nearest dollar.)