Norwich Hardware Store, Ltd. completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Norwich showed Cash of £5,000 and Share Capital-Ordinary of £5,000.
May 1 Purchased merchandise on account from Nute's Wholesale Supply £4,200, terms 2/10, n/30.
2 Sold merchandise on account £2,300, terms 1/10, n/30. The cost of the merchandise sold was £1,300.
5 Received credit from Nute's Wholesale Supply for merchandise returned £500.
9 Received collections in full, less discounts, from customers billed on sales of £2,300 on May 2.
10 Paid Nute's Wholesale Supply in full, less discount.
11 Purchased supplies for cash £400.
12 Purchased merchandise for cash £1,400.
May 15 Received refund for poor quality merchandise from supplier on cash purchase £150.
17 Purchased merchandise from Sherrick Distributors £1,300, FOB shipping point, terms 2/10, n/30.
19 Paid freight on May 17 purchase £130.
24 Sold merchandise for cash £3,200. The merchandise sold had a cost of £2,000.
25 Purchased merchandise from Herbert, Inc. £620, FOB destination, terms 2/10, n/30.
27 Paid Sherrick Distributors in full, less discount.
29 Made refunds to cash customers for defective merchandise £90. The returned merchandise had a fair value of £40.
31 Sold merchandise on account £1,000 terms n/30. The cost of the merchandise sold was £560.
Norwich Hardware's chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 126 Supplies, No. 201 Accounts Payable, No. 311 Share Capital-Ordinary, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold.
Instructions
(a) Journalize the transactions using a perpetual inventory system.
(b) Enter the beginning cash and share capital-ordinary balances and post the transactions.
(Use J1 for the journal reference.)
(c) Prepare an income statement through gross profit for the month of May 2017.