The following transactions for Liberty Tire, Co. occurred during October:
Oct 4 Purchased $5,900 of merchandise on account from Firerock Tire, terms 2/15, n/45, FOB shipping point. Firerock Tire prepaid the $300 shipping cost and added the amount to the invoice.
7 Purchased $350 of supplies on account from Office Maxx, terms 2/10, n/30, FOB destination.
9 Sold $950 (cost, $500) of merchandise on account to L. Simpson, terms 3/15, n/45, FOB destination.
11 Paid $75 freight charges to deliver goods to L. Simpson.
13 Returned $1,400 of the merchandise purchased on October 4 and received a credit.
15 Sold $650 (cost, $350) of merchandise to cash customers.
16 Paid for the supplies purchased on October 7.
18 Paid Firerock Tire the amount due from the October 4 purchase in full.
20 L. Simpson returned $175 (cost, $100) of merchandise from the October 9 sale.
22 Purchased $2,100 of inventory. Paid cash.
23 Received payment in full from L. Simpson for the October 9 sale.
Requirements
1. Journalize the transactions on the books of Liberty Tire, Co. using (a) The perpetual inventory system (b) The periodic inventory system.
2. What was Liberty Tire’s gross profit for the month of October?