Question

The following transactions occurred during July 2010 at Tiny’s Sports Shop:
July 2 Purchased weights on credit from Barbells Company for $900, with terms 3/10, n/30
July 4 Paid freight of $75 on the July 2 purchase
July 8 Sold merchandise to members on credit for $500, terms n/45. The merchandise sold cost $425.
July 9 Received credit of $50 from Barbells for damaged goods that were returned
July 11 Purchased workout equipment from Spinners for cash for $2,000
July 13 Paid Barbells Company in full
July 15 Purchased gloves and workout belts from Get Pumped on credit for
$1,000, terms 5/15, n/60
July 17 Received credit of $25 from Get Pumped for damaged merchandise
July 19 Sold merchandise to members on account, $750, terms n/15. The cost of the merchandise sold was $250.
July 20 Received $700 in cash payment on account from members
July 23 Paid Get Pumped in full
July 27 Granted an allowance of $50 to members for gear that didn’t work properly
July 29 Received $400 in cash payments on account from members
July 31 Paid cash operating expenses of $500 for the month

Requirements
1. Suppose Tiny’s Sports Shop started the month with cash of $8,000, merchandise inventory of $2,000, and common stock of $10,000. Enter each transaction into the accounting equation, assuming Tiny’s Sports Shop uses a perpetual inventory system.
2. Calculate the cost of goods sold for July and the ending balance in inventory.
3. Prepare the multistep income statement, and the statement of changes in shareholders’ equity for the month of July, and the balance sheet at July 31.
4. Calculate the gross profit ratio for Tiny’s Sports Shop for July. Explain what the ratio measures.



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  • CreatedSeptember 01, 2014
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