Paid Great Plains Distributors in full, less discount.

29 Made refunds to cash customers for returned merchandise $180. The returned merchandise had a cost of $120.

30 Sold merchandise on account $3,980, terms n/30. The cost of the merchandise sold was $2,500.

Midwest Distributing Company's chart of accounts includes Cash, Accounts Receivable, Merchandise Inventory, Accounts Payable, Common Stock, Sales, Sales Returns and Allowances, Sales Discounts, Cost of Goods Sold, and Freight-out.

Instructions

(a) Journalize the transactions.

(b) Post the transactions to T accounts. Be sure to enter the beginning cash and common stock balances.

(c) Prepare the income statement through gross profit for the month of April 2007.

(d) Calculate the profit margin ratio and the gross profit rate. (Assume operating expenses were $2,050.)