Better Buy Company purchases inventory in crates of merchandise; each crate of inventory is a unit. The fiscal year of Better Buy ends each January 31. Assume you are dealing with a single Better Buy store in Reno, Nevada. The Reno store began the year with an inventory of 18,000 units that cost a total of $954,000. During the year, the store purchased merchandise on account as follows: (Click the icon to view the purchases.) Cash payments on account totaled $7,111,000. During fiscal year 2018, the store sold 146,000 units of merchandise for $14,965,000, of which $5,000,000 was for cash and the balance was on account. Better Buy and all of its stores use the average-cost method for inventories. The Reno store's operating expenses for the year were $3,250,000. It paid 70% in cash and accrued the rest as accrued liabilities. The store accrued income tax at the rate of 40%. Read the requirements. Requirement 1. Make summary journal entries to record the store's transactions for the year ended January 31, 2018. Better Buy and all of its stores use a perpetual inventory system. Round average cost per unit to two decimal places and round all other amounts to the nearest dollar. (Record debits first, then credits. Exclude explanations from any journal entries.) Let's start with the entry to record the purchases on account. Journal Entry Accounts Date Debit Credit Jan 31 Next, record the cash payments on account for $7,111,000. Journal Entry Accounts Debit Credit Date D Jan 31 Now record the sale of merchandise for $14,965,000, of which $5,000,000 was for cash and the balance was on account. (Do not record the cost related to the sale. We will do this in the next journal entry.) Now record the sale of merchandise for $14,965,000, of which $5,000,000 was for cash and the balance was on account. (Do not record the cost related to the sale. We will do this in the next journal entry.) Journal Entry Accounts Debit Credit Date Jan 31 Record the cost related to the sale of merchandise. (Round unit costs to the nearest cent. Round your answer to the nearest whole dollar.) Journal Entry Date Accounts Debit Credit Jan 31 0 Now record the $3,250,000 operating expenses for the year. Better Buy paid 70% in cash and accrued the rest as accrued liabilities. (Round your final answers to the nearest whole dollar.) Journal Entry Accounts Date Debit Credit Jan 31 Now record the $3,250,000 operating expenses for the year. Better Buy paid 70% in cash and accrued the rest as accrued liabilities. (Round your final answers to the nearest whole dollar.) Journal Entry Accounts Debit Credit Date Jan 31 Finally, record the entry to accrue income tax. (Round your final answers to the nearest whole dollar.) Journal Entry Accounts Date Debit Credit Jan 31 Requirement 2. Prepare a T-account to show the activity in the Inventory account. Post the beginning balance and activity to the T-account and calculate the ending inventory balance. (Abbreviations used: Beg Bal = Beginning Balance, COGS = Cost of Goods Sold, End Bal = Ending Balance.) Requirement 2. Prepare a T-account to show the activity in the Inventory account. Post the beginning balance and activity to the T-account and calculate the ending inventory balance. (Abbreviations used: Beg Bal = Beginning Balance, COGS = Cost of Goods Sold, End Bal = Ending Balance.) Inventory Requirement 3. Prepare the store's income statement for the year ended January 31, 2018. Show totals for gross profit, income before tax and net income. Better Buy Store in Reno Income Statement Year Ended January 31, 2018 Net income (loss)
