Sophie's Sofas buys sofas for \($1400\) each and sells them for \($2400\) each. On 1 July 2025, 45 sofas were in inventory. Sophie's Sofas completed the transactions below during July.

A physical inventory count taken on 31 July 2025 showed 63 chairs in stock.
Required

(a) In two columns and ignoring GST, prepare general journal entries to record the transactions assuming:
i. a perpetual inventory system is used ii. a periodic inventory system is used. Narrations are not required.

(b) Assuming Sophie’s Sofas closes its accounts at month end; prepare relevant entries to close the accounts under both inventory systems.

(c) Prepare two separate income statements showing gross profit and profit for July, assuming that:

i. the perpetual inventory system was used 

ii. the periodic inventory system was used.

Transcribed Image Text:

July. 1 Purchased 90 sofas on account. Terms: 3/10, n/30, EXW supplier's warehouse. Paid freight cost of $500 on 1 July purchase. 2 3 Sold 70 sofas on account. Terms: 2/10, n/30. Paid freight cost of $160. 7 9 Returned 20 of the sofas purchased on 1 July and paid the amount due on the sofas retained in stock. A customer returned 12 of the sofas sold on 3 July. The sofas were not defective and were returned to stock. 11 Purchased 75 sofas on credit. Terms: 2/10, n/30, EXW supplier's warehouse. 12 Received payment from customer for the amount due on 3 July sale. 17 Sold 120 sofas for cash at $2000 each. 19 Five of the sofas sold on 17 July were returned by the customer for a cash refund. The sofas were not defective. 22 Paid the supplier the amount owed for the 11 July purchase.