Part I $(30$ marks$)$

Evergreen Backpack Company $($Evergreen$)$ uses a perpetual inventory system and closes its

account annually on $31$ December. The following information was extracted from the adjusted

trial balance as at $30$ November $2022$:

Debit

$

Credit

$

Sales $1,460,800$

Sales returns $4,800$

Cost of goods sold $560,000$

Cash $56,000$

Accounts receivable $78,000$

Inventory $240,000$

Accounts payable $52,500$

The following transactions occurred in December $2022$:

$1$ Dec Evergreen purchased $$80,000$ inventory on credit from Commuter

Company.

$5$ Dec Evergreen sold $50$ backpacks to X$-$Company on account at selling price of

$$500$ each. Gross profit rate was $30\%.$

$7$ Dec Evergreen returned $$10,000$ inventory to Commuter Company due to bad

quality.

$12$ Dec Yoyo Company returned $10$ backpacks to Evergreen due to incorrect colour

and got a cash refund. The selling price was $$550$ each and the gross profit

rate was $40\%.$

$23$ Dec Evergreen paid to Commuter half of the amount regarding the purchase in

December.

$27$ Dec X$-$Company settled in full the amount due to Evergreen

$30$ Dec Evergreen received an order of $$30,000$ from a new customer. The

backpacks are to be delivered on $10$ January $2023$ and payment will be

settled after the delivery.

$31$ Dec Evergreen conducted a physical count of inventory and revealed $$294,700$

inventory was on hand.

BHMH$21012023/24$ S$1$ Assignment $2$

Page $3$

Required:

$($a$)$ Prepare journal entries for Evergreen for the above transactions in December $2022.$ If an

item does not require an entry, state $$No entry$.$ Explanation is not required. $(20$ marks$)$

$($b$)$ Prepare the partial Income Statement for Evergreen, showing the captions with figures of

Net sales and Gross Profit for the year ended $31$ December $2022.$