Chapter 4, Problem 48BP

Journalizing inventory purchases, sales, returns, and freight transactions; calculating gross profit (Learning Objectives 3, 4, 5, & 6) 25-30 min.

The following transactions for Westcoast Tire Co., occurred during July:

Jul 4	Purchased $5,500 of merchandise on account from Meridian Tire Supply, Terms, 1/15, n/45, FOB shipping point. Meridian Tire Supply prepaid the $475 shipping cost and added the amount to the invoice.
7	Purchased $300 of supplies on account from Office Express. Terms, 3/10, n/30, FOB destination.
9	Sold $5,100 (cost, $2,800) of merchandise on account to P. Larson. Terms, 2/15, n/45, FOB destination.
11	Paid $50 freight charges to deliver goods to P. Larson.
13	Returned $500 of the merchandise purchased on July 4 and received a credit.
15	Sold $900 (cost, $545) of merchandise to cash customers.
16	Paid for the supplies purchased on July 7.
18	Paid Meridian Tire Supply the amount due from the July 4 purchase in full.
20	P. Larson returned $250 (cost, $140) of merchandise from the July 9 sale.
22	Purchased $3,400 of inventory. Paid cash.
23	Received payment in full from P. Larson for the July 9 sale.
31	The refund liability for the month of July was estimated to be $270. The cost of goods estimated to be returned was $165.

Requirements

1. 1. Journalize the transactions on the books of Westcoast Tire Co., assuming the “net” method is used.
2. 2. What was Westcoast Tire’s gross profit for the month of July?