The following information relates to the Pike Corporation for the fiscal ear ended December 31, 2016:
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a. |
Merchandize inventory on hand at January 1 is $100,000. |
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b. |
During the year, the company purchased merchandize on credit from a single supplier for $200,000; terms 2/10, n30. Half of the purchases were paid within the discount period. The other half has not yet been paid. |
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c. |
The company paid $8,000 in freight charges on merchandize purchased, fob shipping point. |
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d. |
Damaged merchandize with an invoice price of $4,000 was returned to the supplier. A cash refund for the returned amount less discount was received. This merchandize was part of the purchase in transaction b that had been paid within the discount period. |
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e. |
Sold merchandize on credit to a customer for $20,000. (Cost to Pike: $14,000.) |
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f. |
An allowance of $2,750 was granted because merchandize sold in ewas not satisfactory. (Cost: $2,000.) |
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g. |
A cheque for $2,750 was issued to the customer referred to in f. |
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h. |
The ending inventory was counted and valued at $290,000. |
Assume Pike uses the perpetual inventory system.
Required:
- Prepare journal entries for each of the transactions. Include a brief description for each entry. Show calculations for shrinkage.
- Prepare a partial income statement including sales, cost of goods sold, and gross profit. Calculate gross profit percentage.
- Prepare the necessary closing entries. Include general ledger account numbers and a brief description for each entry.
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