First Choice Ltd. completed the following merchandising transactions in the month of August 2012. At the beginning of August, First Choice’s ledger showed Cash $7,380; Accounts Receivable $1,660; Merchandise Inventory $3,900; Common Shares $8,030; and Retained Earnings $4,060. First Choice uses a perpetual inventory system.

Problem 5-5A

First Choice Ltd. completed the following merchandising transactions in the month of August 2012. At the beginning of August, First Choice’s ledger showed Cash $7,380; Accounts Receivable $1,660; Merchandise Inventory $3,900; Common Shares $8,030; and Retained Earnings $4,060. First Choice uses a perpetual inventory system.

August	1		Purchased merchandise on account from Depot Wholesale Supply Ltd. for $5,910, terms 1/10, n/30, FOB shipping point.
	3		Freight charges of $146 were paid by the appropriate party on the merchandise purchased on August 1.
	4		Sold merchandise on account to Ry Company for $3,900, terms 2/10, n/30, FOB destination. The cost of the merchandise was $2,170.
	7		Freight charges of $92 were paid by the appropriate party on the August 4 sale.
	8		Received a $300 credit from Depot Wholesale Supply when merchandise was returned.
	9		Paid Depot Wholesale Supply in full.
	11		Purchased supplies for $400 cash.
	14		Received payment in full from Ry Company for merchandise sold on account on August 4.
	15		Collected $1,030 of the accounts receivable outstanding at the beginning of the month. All accounts were originally sold on terms of n/30, with no sales discounts.
	18		Purchased merchandise from Harlow Distributors Inc. for $2,180, terms n/30, FOB destination.
	21		Freight of $53 was paid by the appropriate party on the August 18 purchase of merchandise.
	22		Sold merchandise to various customers for $6,680 cash. The cost of the merchandise was $3,570.
	29		Paid a $120 cash refund to customers for returned merchandise. The cost of the returned merchandise was $69. It was restored to inventory.
	31		A physical inventory count was taken and determined that there was $5,240 of inventory on hand. Prepare any adjustment required.

 

Prepare T accounts and enter the opening balances.

Record and post the August transactions for First Choice. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If a journal entry is not required, select "No entry required" for each account name and enter 0 as the amount. Record journal entries in the order presented in the problem. Round answers to the nearest whole dollar, e.g. 5,275.)

Post the adjusting entries.

Prepare a partial multiple-step income statement for the month ended August 31, 2012, through to gross profit.

Prepare the current assets section of the statement of financial position as at August 31, 2012. (List Current assets in order of liquidity.)

 

 

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