Prairie Hardware operates a store in Red Deer, Alberta. The company began 2017 with an inventory of 50 snow blowers that cost $8,000 in total. During the year, the company purchased merchandise on account as follows:
March (60 units at $170) ............. $ 10,200
August (40 units at $174) ............ 6,960
October (190 units at $180) ......... 34,200
Total purchases ........................ $ 51,360
Cash payments on account during the year totaled $46,000.
During November 2017 the company sold 300 units of merchandise for $85,000, of which $52,000 was for cash and the balance was on account. Prairie uses the FIFO method for inventories.
Required
1. Make summary journal entries to record the company's transactions for the year ended December 31, 2017. The company uses a perpetual inventory system.
2. Determine the FIFO cost of the company's ending inventory at December 31, 2017. Use a T-account.
3. Calculate Prairie Hardware's gross margin for the year ended December 31, 2017.