Cost Accumulation: Merchandising: The Niagara Dress Shop uses the periodic inventory method and closes its books monthly. Below find the transactions for May.

Other information: Beginning inventory was $500,000. Each dress in beginning inventory was $20.00. The company used a first-in. first-out (FIFO) accounting system.

Required:

a. Prepare journal entries to record the transactions.

b. Prepare an income statement and a cost of goods sold statement. (Hint: Treat the $3,400 returned dresses as a decrease in cost of goods available for sale.)

Transcribed Image Text:

1. 2. 3. 4. 5. 6. 7. Purchased dresses costing $90,000 on account. Niagara has a special arrange- ment with its supplier to pay a set rate for all purchases each month. The cost this month is $10 per dress. Paid $9,000 in transportation-in charges. Sales commission of $84,000 was incurred in cash. The receiving department found defective dresses valued at $3,400, which were returned to the supplier. Administration expenses totaled $38,000 and were paid in cash. Cash sales were $248,000 and credit sales were $162,000. They sold 12.000 dresses. Niagara purchased $4,000 in newspaper advertising on account.