At the beginning of June, Circuit Country has a balance in inventory of $2,050. The following transactions occur during the month of June. June 2 Purchase radios on account from Radio World for $1,750, terms 2/15, n/45.
June 4 Pay cash for freight charges related to the June 2 purchase from Radio World, $210. June 8 Return defective radios to Radio World and receive credit, $200.
June 10 Pay Radio World in full. June 11 Sell radios to customers on account, $3,100, that had a cost of $2,250.
June 18 Receive payment on account from customers, $2,100.
June 20 Purchase radios on account from Sound Unlimited for $2,850, terms 2/10, n/30.
June 23 Sell radios to customers for cash, $4,350, that had a cost of $2,650.
June 26 Return damaged radios to Sound Unlimited and receive credit of $500.
June 28 Pay Sound Unlimited in full.

Required:
a. Assuming that Circuit Country uses a perpetual inventory system, record transactions using the following account titles: Cash, Accounts Receivable, Inventory, Accounts Payable, Sales, and Cost of Goods Sold.
b. Prepare the top section of the multiple-step income statement through gross profit for the month of June.

Circuit Country

a. Journal Entries:

June 2: Debit Inventory $1,750

Credit Accounts payable (Radio World) $1,750

To record the purchase of goods, terms 2/15, n/45.

June 4: Debit Freight-in $210

Credit Cash $210

To record the payment for freight.

June 8: Debit Accounts payable (Radio World) $200

Credit Inventory $200

To record the return of goods.

June 10: Debit Accounts payable (Radio World) $1,550

Credit Cash $1,519

Credit Cash Discounts $31

To record payment on account, including discounts.

June 11: Debit Accounts receivable $3,100

Credit Sales Revenue $3,100

To record the sale of goods on account.

June 11: Debit Cost of goods sold $2,250

Credit Inventory $2,250

To record the cost of goods sold.

June 18: Debit Cash $2,100

Credit Accounts receivable $2,100

To record cash received on account.

June 20: Debit Inventory $2,850

Credit Accounts payable (Sound Unlimited) $2,850

To record the purchase of goods on credit, terms 2/10, n/30.

June 23: Debit Cash $4,350

Credit Sales Revenue $4,350

To record the sale of goods for cash.

June 23: Debit Cost of goods sold $2,650

Credit Inventory $2,650

To record the cost of goods sold.

June 26: Debit Accounts payable(Sound Unlimited) $500

Credit Inventory $500

To record the return of goods.

June 28: Debit Accounts payable(Sound Unlimited) $2,350

Credit Cash $2,303

Credit Cash Discounts $47

To record payment on account, including discounts.

b. Income Statement for the month ended June 30:

Sales Revenue      $7,450

Cost of goods sold 5,032

Gross profit           $2,418

Explanation:

a) Data and Analysis:

June 1: Beginning inventory $2,050

June 2: Inventory $1,750 Accounts payable (Radio World) $1,750, terms 2/15, n/45.

June 4: Freight-in $210 Cash $210

June 8: Accounts payable (Radio World) $200 Inventory $200

June 10: Accounts payable (Radio World) $1,550 Cash $1,519 Cash Discounts $31

June 11: Accounts receivable $3,100 Sales Revenue $3,100

June 11: Cost of goods sold $2,250 Inventory $2,250

June 18: Cash $2,100 Accounts receivable $2,100

June 20: Inventory $2,850 Accounts payable (Sound Unlimited) $2,850 terms 2/10, n/30.

June 23: Cash $4,350 Sales Revenue $4,350

June 23: Cost of goods sold $2,650 Inventory $2,650

June 26:  Accounts payable(Sound Unlimited) $500 Inventory $500

June 28:  Accounts payable(Sound Unlimited) $2,350 Cash $2,303 Cash Discounts $47

Cash

Date        Account Titles             Debit      Credit

June 4:    Freight-in                                              $210

June 10:  Accounts payable (Radio World)         1,519

June 18:  Accounts receivable $2,100

June 23: Sales Revenue           4,350

June 28:  Accounts payable(Sound Unlimited) 2,303

Accounts Receivable

Date     Account Titles             Debit      Credit

June 11: Sales Revenue        $3,100

June 18: Cash                                      $2,100

Inventory

Date     Account Titles             Debit      Credit

June 1  Beginning balance   $2,050

June 2 Accounts payable

             (Radio World)             1,750

June 8: Accounts payable (Radio World) $200

June 11: Cost of goods sold                     2,250

June 20: Accounts payable

             (Sound Unlimited)    2,850

June 23: Cost of goods sold                 2,650

June 26:  Accounts payable

               (Sound Unlimited)                     500

Accounts Payable

Date     Account Titles             Debit      Credit

June 2: Inventory                   $1,750

June 8: Inventory                                      $200

June 10: Cash                           1,519

             Cash Discounts              31

June 20: Inventory                2,850

June 26:  Inventory                                   500

June 28:  Cash                      2,303

               Cash Discounts          47

Sales

Date     Account Titles             Debit      Credit

June 11: Accounts receivable                 $3,100

June 23: Cash                                          4,350

June 30: Income Summary    $7,450

Cost of Goods Sold

Date     Account Titles             Debit      Credit

June 4: Freight-in                    $210

June 10: Cash discounts                             $31

June 11: Inventory                  2,250

June 23: Inventory                2,650

June 28: Cash discounts                             47

June 30: Income Summary                 $5,032

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