Olaf Distributing Company completed the following merchandising transactions in the month of April. At the beginning of April, the ledger of Olaf showed Cash of $9,000 and M. Olaf, Capital of $9,000.

Apr. 2 Purchased merchandise on account from Dakota Supply Co. $6,900, terms 1/10, n/30.

4 Sold merchandise on account $5,500, FOB destination, terms 1/10, n/30.The cost of the merchandise sold was $4,100.

5 Paid $240 freight on April 4 sale.

6 Received credit from Dakota Supply Co. for merchandise returned $500.

11 Paid Dakota Supply Co. in full, less discount.

13 Received collections in full, less discounts, from customers billed on April 4.

14 Purchased merchandise for cash $3,800.

16 Received refund from supplier for returned goods on cash purchase of April 14, $500.

18 Purchased merchandise from Skywalker Distributors $4,500, FOB shipping point, terms 2/10, n/30.

20 Paid freight on April 18 purchase $100.

23 Sold merchandise for cash $6,400.The merchandise sold had a cost of $5,120.

26 Purchased merchandise for cash $2,300.

27 Paid Skywalker Distributors in full, less discount.

29 Made refunds to cash customers for defective merchandise $90. The returned merchandise had a scrap value of $30.

30 Sold merchandise on account $3,700, terms n/30.The cost of the merchandise sold was $2,800.

Olaf Company’s chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Merchandise Inventory, No. 201 Accounts Payable, No. 301 M. Olaf, Capital, No. 401 Sales, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, No. 505 Cost of Goods Sold, and No. 644 Freight-out.

Instructions

(a) Journalize the transactions using a perpetual inventory system.

(b) Enter the beginning cash and capital balances, and post the transactions. (Use J1 for the journal reference.)

(c) Prepare the income statement through gross profit for the month of April 2010.