5-21 The Steed Art Supplies Company sells various art supplies to local artists.

Question

5-21 The Steed Art Supplies Company sells various art supplies to local artists. The company uses a perpetual inventory system, and the balance of its inventory of art supplies at the beginning of August was $2,500. Its cash balance was $800 and the J. Steed, capital bal- ance was $3,300 at the beginning of August. The company entered into the following transactions during August: Date Aug. Transactions J. Steed invested another $1,000 cash into the company. 2 4 Made a $900 sale of art supplies on credit to P. Tarlet, with terms of n/15; the Purchased $400 of art supplies for cash. 6 Purchased $700 of art supplies on credit from the Rony Company, with terms of 10 Returned, for credit to its account, $100 of defective art supplies purchased on cost of the inventory sold was $550. n/20. August 6 from the Rony Company. 12 Made cash sales of $330 to customers; the cost of the inventory sold was $200. 13 Granted a $25 allowance to a customer for damaged inventory sold on August 12 15 Received payment from P. Tarlet of the amount due for inventory sold on credit on August 4 25 Paid balance due to the Rony Company for purchase on August 6 Required: (1) Record the preceding transactions in appropriate account columns.

Explanation / Answer

(1) and (2) Accounts with balances as required are as prepared below:

(3) Gross Profit and Gross Profit percentage is as calculated below:

Cash Particulars Amount Particulars Amount Beg Balance 800 Aug-02 400 Aug-01 1,000 Aug-13 25 Aug-12 330 Aug-25 600 Aug-15 900 3,030 1,025 Ending balance 2,005 Art Supplies Particulars Amount Particulars Amount Beg Balance 2,500 Aug-04 550 Aug-02 400 Aug-10 100 Aug-06 700 Aug-12 200 3,600 850 Ending balance 2,750 J.Steed Capital Particulars Amount Particulars Amount Beg Balance 3,300 Aug-01 1,000 0 4,300 Ending balance 4,300 Sales Revenue Aug-04 900 Aug-12 330 0 1,230 Ending balance 1,230 Account Receivable Particulars Amount Particulars Amount Aug-04 900 Aug-15 900 900 900 Ending balance 0 Cost of goods sold Particulars Amount Particulars Amount Aug-04 550 Aug-12 200 750 0 Ending balance 750 Accounts payable Particulars Amount Particulars Amount Aug-10 100 Aug-06 700 Aug-25 600 700 700 Ending balance 0 Sales allowances Particulars Amount Particulars Amount Aug-13 25 25 0 Ending balance 25

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