he following are the sales transactions of EcoMart Merchandising. EcoMart uses a perpetual inventory system and the gross method.October 1Sold merchandise for $1,500, with credit terms n/30, invoice dated October 1. The cost of the merchandise is $900.October 6The customer in the October 1 sale returned $150 of merchandise for full credit. The merchandise, which had cost $90, is returned to inventory.October 9Sold merchandise for $700 cash. Cost of the merchandise is $450.October 30Received payment for the amount due from the October 1 sale less the return on October 6. Use the above transactions, to analyze each transaction by indicating its effects on the components of the income statement—specifically, identify the accounts and amounts (including + or −) for each transaction.

The objective of the question is to analyze the given transactions and determine their effects on the components of the income statement. This involves identifying the accounts and amounts affected by each transaction.Let's start with the first transaction on October 1. The company sold merchandise for $1,500 on credit. This increases the Accounts Receivable by $1,500 (+$1,500) and increases the Sales Revenue by $1,500 (+$1,500). The cost of the merchandise sold is $900, which decreases the Inventory by $900 (-$900) and increases the Cost of Goods Sold (COGS) by $900 (+$900).Next, on October 6, the customer returned merchandise worth $150. This decreases the Accounts Receivable by $150 (-$150) and decreases the Sales Revenue by $150 (-$150). The cost of the returned merchandise is $90, which increases the Inventory by $90 (+$90) and decreases the COGS by $90 (-$90).On October 9, the company sold merchandise for $700 cash. This increases the Cash account by $700 (+$700) and increases the Sales Revenue by $700 (+$700). The cost of the merchandise sold is $450, which decreases the Inventory by $450 (-$450) and increases the COGS by $450 (+$450).Finally, on October 30, the company received payment for the amount due from the October 1 sale less the return on October 6. This decreases the Accounts Receivable by the net amount of the October 1 sale and the October 6 return, which is $1,500 - $150 = $1,350 (-$1,350) and increases the Cash account by the same amount (+$1,350).In summary, the transactions affected the Accounts Receivable, Inventory, Sales Revenue, Cost of Goods Sold, and Cash accounts. The net effects of the transactions were to increase Sales Revenue by $2,050, increase COGS by $1,260, decrease Inventory by $1,260, and increase Cash by $2,050.

Answered: he following are the sales transactions…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

he following are the sales transactions of EcoMart Merchandising. EcoMart uses a perpetual inventory system and the gross method.

October 1	Sold merchandise for $1,500, with credit terms n/30, invoice dated October 1. The cost of the merchandise is $900.
October 6	The customer in the October 1 sale returned $150 of merchandise for full credit. The merchandise, which had cost $90, is returned to inventory.
October 9	Sold merchandise for $700 cash. Cost of the merchandise is $450.
October 30	Received payment for the amount due from the October 1 sale less the return on October 6.

Use the above transactions, to analyze each transaction by indicating its effects on the components of the income statement—specifically, identify the accounts and amounts (including + or −) for each transaction.

AI-Generated Solution

AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.