Dundas Desks buys desks for $80 each and sells them

Dundas Desks buys desks for $80 each and sells them for $140 each. On 1 August 2016, 86 desks were in inventory. Dundas Desks completed the transactions below during August.

Aug.

2

3

4

8

10

12

13

18

20

23

Purchased 140 desks on account. Terms: 2/10, n/30, EXW supplier’s warehouse.

Paid freight cost of $120 on 2 August purchase.

Sold 80 desks on account. Terms: 3/10, n/30, DDP acquirer’s warehouse. Paid freight cost of $60.

Returned 30 of the desks purchased on 2 August and paid the amount due on the desks retained in stock.

A customer returned 11 of the desks sold on 4 August. The desks were not defective and were returned to stock.

Purchased 72 desks on credit. Terms: 2/10, n/30, EXW supplier’s warehouse.

Received payment from customer for the amount due on 4 August sale.

Sold 140 desks for cash at $120 each.

Six of the desks sold on 18 August were returned by the customer for a cash refund. The desks were not defective.

Paid the supplier the amount owed for the 12 August purchase.

A physical inventory count taken on 31 August 2016 showed 63 desks in stock.

Required

A.    In two columns and ignoring GST, prepare general journal entries to record the transactions assuming:

     1.    a perpetual inventory system is used

     2.    a periodic inventory system is used. Narrations are not required.

B.    Repeat requirement A but assume the business is registered for the GST.

C.    Assuming Dundas Desks closes its accounts at month end; prepare relevant entries to close the accounts under both inventory systems.

D.   Prepare two separate income statements showing gross profit and profit for August, assuming that:

    1.     the perpetual inventory system was used

    2.     the periodic inventory system was used.

 

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