Kingbird, Inc. completed the following merchandising transactions in the month o
ID: 3145865 • Letter: K
Question
Kingbird, Inc. completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Kingbird, Inc. showed Cash of $4,500 and Common Stock of $4,500.
Kingbird, Inc. ’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 126 Supplies, No. 201 Accounts Payable, No. 311 Common Stock, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold.
A.) Enter the beginning cash and common stock balances and post the transactions. (Post entries in the order of journal entries presented in the previous question.)
B.) Prepare an income statement through gross profit for the month of May 2019.
May 1 Purchased merchandise on account from Gray's Wholesale Supply $4,100, terms 2/10, n/30. 2 Sold merchandise on account $1,800, terms 1/10, n/30. The cost of the merchandise sold was $1,100. 5 Received credit from Gray's Wholesale Supply for merchandise returned $300. 9 Received collections in full, less discounts, from customers billed on sales of $1,800 on May 2. 10 Paid Gray's Wholesale Supply in full, less discount. 11 Purchased supplies for cash $350. 12 Purchased merchandise for cash $1,300. 15 Received refund for poor quality merchandise from supplier on cash purchase $200. 17 Purchased merchandise from Amland Distributors $1,200, FOB shipping point, terms 2/10, n/30. 19 Paid freight on May 17 purchase $140. 24 Sold merchandise for cash $3,300. The merchandise sold had a cost of $2,100. 25 Purchased merchandise on account from Horvath, Inc. $700, FOB destination, terms 2/10, n/30. 27 Paid Amland Distributors in full, less discount. 29 Made refunds to cash customers for defective merchandise $60. The returned merchandise had a fair value of $30. 31 Sold merchandise on account $1,000, terms n/30. The cost of the merchandise sold was $600.Explanation / Answer
AT the beginning of May:
cash = $4500
Stock = $4500
Part A, calculation of cash and stock:
Cash, transactions taken into consideration as they are cash transactions:
tansaction dated May9, may10, May 11, May 12, May 15, May 19, May 24, May 27, May 29.
May 9 = received cash as settlement for sales, May 10 paid for the credit purchase - return, May 11 cash purchase of supplies, May 12 cash purchase, May 15 refund, May 19 paid freight, May 24 cash sales, May 27 Paid supplier and May 29 gave refund to customer.
Total transaction of cash = 4500 +1800 - 3800 - 350 -1300 + 200 - 140 + 3300 - 1200 - 60
= $2950
Stock balance, transactions taken into consideration:
May 1 credit purchase, May 2 credit sale, May 5 merchandize returned, May 12 merchandize purchased, May 15 refund received for merchandized sent back, May 17 purchsed merchandise, May 24 Sold merchandize, May 27 sold merchandize, May 29 refund to customer fair value used in stock, May 31 sales
Stock Balance = 4500 +4100 - 1100 - 300 +1300 - 200 + 1200 - 2100 + 700 + 30 - 600
= $7530
Income statement:
Total sales = 1800 + 3300 - 60 + 1000.................... actual sales and refund considered as part of income
= 6040
Total expenditure occur from cost of goods sold and other expenditure for supplies and freight
= 1100 + 350 + 140 + 2100 - 30 + 600
= 4260
Gross profit would only consider the cost of goods sold = 1100 + 2100 - 30 + 600 = 3870
Gross profit = 6040 - 3870 = 2170
Net profit = 6040 - 4260 = 1780
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