At the beginning of the current tennis season, on April 1, 2014, Kicked-Back Tennis Shop's inventory consisted of 50 tennis racquets at a cost of $40 each. Kicked-Back uses a perpetual inventory system. The following transactions occurred in April:

Apr. 2 Purchased 160 additional racquets from Roberts Inc. for $6,400, terms n/30.

4 Determined that five of the racquets purchased on April 2 were damaged and returned them to Roberts Inc. Roberts Inc. credited Kicked-Back's account.

5 Sold 45 racquets to Tennis Dome for $90 each, terms n/30.

6 Tennis Dome returned 15 of the racquets after determining it had purchased more racquets than it needed. Kicked-Back gave Tennis Dome a credit on its account and returned the racquets to inventory.

10 Sold 40 racquets at $90 each to cash customers.

12 Ten of these racquets were returned for cash. The customers claimed they never play tennis and had no idea how they had been talked into purchasing the racquets. Refunded cash to these customers and returned the racquets to inventory.

17 An additional 10 of the racquets sold on April 10 were returned because the racquets were damaged. The customers were refunded cash and the racquets were sent to a local children's club as a gift.

25 Sold 60 racquets to the Summer Club for $90 each, terms n/30.

29 Summer Club returned 25 of the racquets after the tennis pro had examined them and determined that these racquets were of inferior quality. Kicked-Back gave Summer Club a credit and decided to return the racquets to inventory with plans to sell them for the reduced price of $75 each.

Instructions

(a) Record the transactions for the month of April for Kicked-Back.

(b) Create T accounts for sales, sales returns, cost of goods sold, and merchandise inventory. Post the opening balance and April's transactions, and calculate the April 30 balances.

(c) Calculate net sales and gross profit.

Taking It Further

Assume that the owner of Kicked-Back hired an employee to run the store and is not involved in operating the business. The owner wants to know the amount of net sales and gross profi t for the month. Will the owner be missing any important information by requesting only these two numbers? Explain.