At the beginning of June, Circuit Country has a balance in inventory of $2,000. The following transactions occur during the month of June. June 2 Purchase radios on account from Radio World for $1,700, terms 1/15, n/45.
June 4 Pay freight charges related to the June 2 purchase from Radio World, $200.
June 8 Return defective radios to Radio World and receive credit, $300.
June 10 Pay Radio World in full.
June 11 Sell radios to customers on account, $3,000, that had a cost of $2,200.
June 18 Receive payment on account from customers, $2,000.
June 20 Purchase radios on account from Sound Unlimited for $2,800, terms 3/10, n/30.
June 23 Sell radios to customers for cash, $4,300, that had a cost of $2,600.
June 26 Return damaged radios to Sound Unlimited and receive credit of $300.
June 28 Pay Sound Unlimited in full.

Required:
1.
Assuming that Circuit Country uses a perpetual inventory system, record the transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2.
Prepare the top section of the multiple-step income statement through gross profit for the month of June

Part 1

Recording of transactions

June 2

Debit  : Merchandise Inventory $1,700

Credit : Accounts Payable $1,700

June 4

Debit  : Freight expenses $200

Credit : Cash $200

June 8

Debit  : Accounts Payable $300

Credit : Merchandise Inventory $300

June 10

Debit  : Accounts Payable $1.400

Credit : Discount received $14

Credit : Cash $1,386

June 11

Debit  : Accounts Receivables  $3,000

Debit : Cost of sales $2,200

Credit : Sales Revenue $3,000

Credit : Merchandise Inventory $2,200

June 18

Debit  : Cash $2,000

Credit : Accounts Receivables  $2,000

June 20

Debit  : Merchandise Inventory $2,800

Credit : Accounts Payable $2,800

June 23

Debit  : Accounts Receivables  $4,300

Debit : Cost of sales $2,600

Credit : Sales Revenue $4,300

Credit : Merchandise Inventory $2,600

June 26

Debit  : Accounts Payable $300

Credit : Merchandise Inventory $300

June 28

Debit  : Accounts Payable $2,500

Credit : Discount received $75

Credit : Cash $2,425

Part 2

Circuit Country

Multiple-step income statement for the month of June

Sales Revenue ($3,000 + $4,300)               $7,300

Less Cost of Sales ($2,200 + $2,600)        ($4,800)

Gross Profit                                                    $2,500

Explanation:

Part 1

Perpetual inventory system keeps accurate records of the cost of sales and inventory balance after each and every purchase and sale made.

Also remember, Payments are always made less of credit allowance and discount (if payment is done within the discount period).

Part 2

A multiple -step up to gross profit is required. The data concerning Sales and Cost of Sales can be easily extracted from the records.

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