Refer to the transactions of CD City in P6-3A.
In P3
July 3 Purchase CDs on account from Wholesale Music for $1,800, terms 2/10, n/30.
July 4 Pay freight charges related to the July 3 purchase from Wholesale Music, $100.
July 9 Return incorrectly ordered CDs to Wholesale Music and receive credit, $300.
July 11 Pay Wholesale Music in full.
July 12 Sell CDs to customers on account, $4,800, that had a cost of $2,500.
July 15 Receive full payment from customers related to the sale on July 12.
July 18 Purchase CDs on account from Music Supply for $2,600, terms 1/10, n/30.
July 22 Sell CDs to customers for cash, $3,700, that had a cost of $2,000.
July 28 Return CDs to Music Supply and receive credit of $200.
July 30 Pay Music Supply in full.
Required:
1. Assuming that CD City uses a periodic inventory system, record the transactions.
2. Record the month-end adjustment to inventory, assuming that a final count reveals ending inventory with a cost of $2,370.
3. Prepare the top section of the multiple-step income statement through gross profit for the month of July.