Best Buy purchases merchandise inventory by the crate; each crate of inventory is a unit. The fiscal year of Best Buy ends each February 28.

Assume you are dealing with a single Best Buy store in Toronto, Ontario, and that the store experienced the following: The store began fiscal year 2017 with an inventory of 20,000 units that cost a total of $1,000,000. During the year, the store purchased merchandise on account as follows:

April (30,000 units @ cost of $60).................................................................... $1,800,000

August (50,000 units @ cost of $64)................................................................... 3,200,000

November (60,000 units @ cost of $70).............................................................. 4,200,000

Total purchases................................................................................................... $9,200,000

Cash payments on account totaled $8,800,000.

During fiscal year 2017, the store sold 150,000 units of merchandise for $14,400,000.

Cash accounted for $5,000,000 of this, and the balance was on account. Best Buy uses the FIFO method for inventories.

Operating expenses for the year were $4,000,000. The store paid 80% in cash and accrued the rest as accrued liabilities. The store accrued income tax at the rate of 33%.

Requirements

1. Make summary journal entries to record the store's transactions for the year ended February 28, 2017. Best Buy uses a perpetual inventory system.

2. Prepare a T-account to show the activity in the Inventory account.

3. Prepare the store's income statement for the year ended February 28, 2017. Show totals for gross profit, income before tax, and net income?