Data for Stojanovic Distributing Company are presented in P5-5B. A physical inventory count shows the company has $5,570 of inventory on hand at September 30, 2014.
In P 5-5
Sept. 2 Purchased $13,500 of merchandise inventory from Moon Supply Co., terms 1/15, n/30, FOB destination.
4 The correct company paid $325 cash for freight charges on the September 2 purchase.
5 Sold merchandise inventory to Brandon Retailers for $18,000. The cost of the merchandise was $11,310 and the terms were 2/10, n/30, FOB destination.
6 Issued a $1,425 credit for merchandise returned by Brandon Retailers. The merchandise originally cost $890 and was returned to inventory.
6 The correct company paid $420 freight on the September 5 sale.
8 Purchased $900 of supplies for cash.
10 Purchased $6,450 of merchandise inventory from Tina Wholesalers, terms 2/10, n/30, FOB shipping point.
10 The correct company paid $150 freight costs on the purchase from Tina Wholesalers.
12 Received a $450 credit from Tina Wholesalers for returned merchandise.
15 Paid Moon Supply Co. the amount due.
15 Collected the balance owing from Brandon Retailers.
19 Sold merchandise for $10,875 cash. The cost of this merchandise was $6,855.
20 Paid Tina Wholesalers the balance owing from the September 10 purchase.
25 Made a $750 cash refund to a cash customer for merchandise returned. The returned merchandise had a cost of $470. The merchandise was damaged and could not be resold.
30 Sold merchandise to Dragen & Company for $6,420, terms n/30, FOB shipping point. Stojanovic's cost for this merchandise was $4,050.
(a) Record the transactions assuming Stojanovic Distributing Company uses a periodic inventory system.
(b) Set up general ledger accounts for merchandise inventory and all of the temporary accounts used in the merchandising transactions. Enter beginning balances, and post the transactions.
(c) Prepare a partial multiple-step income statement, up to gross profit, for the month of September 2014.
Taking It Further
Will Stojanovic Distributing Company's gross profit be higher, lower, or the same amount, if it uses a periodic inventory system instead of a perpetual inventory system? Explain