LAKESHORE TEA COMPANY: MERCHANDISING OPERATIONS

Lakeshore Tea Company Inc. $($Lakeshore$)$ was launched by Anna Davisin $2019.$ The company operated as an herbal tea processor and supplier in Mississauga, Ontario. Davis imported herbs and tea leaves from a variety of sources across the globe. Over its first two years of operations, Lakeshore experienced significant growth and began supplying a variety of restaurants, health food stores, and small grocery outlets in the Greater Toronto Area. Apart from small orders from friends and family, which were usually paid for in cash, all of Lakeshore's sales were made on credit. Payment terms for all credit sales were $3/8,$ net $30\mathrm{.}1$ Davis totalled cash sales and prepared the company's financial statements on a monthly basis$\mathrm{.}2$

Lakeshore's April $30,2021,$ statement of financial position included the following selected account balances:$3$

Accounts Receivable

$ $4,469$

Inventory

$5,927$

Accounts Payable

$3,902$

During May $2021,$ Davis recorded the following notes aboutLakeshore's transactions:$4$

May $1$ Great Lakes Grocer purchased a large quantity of Lakeshore's product for $$2,834,$ on credit.

May $3$ Email received from Great Lakes Grocery with a complaint that multiple packages were improperly sealed. Agreed to reduce Great Lakes Grocery's account by $$230.$

May $4$ Ordered supply of tea leaves from Mangrove TradingCo. in Colombo, Sri Lanka. The order totaled $$4,765$ with terms of $10$ EOM, FOB Mississauga.

May $5$ Received $$2,256$ payment from Credit Valley Health$-$Mart for goods purchased on credit on April $24,2021.$May $7$ Electronic funds transfer arrived from Great Lakes Grocery as payment for goods sold on May $1.$

May $8$ Received electronic confirmation that the shipment from Mangrove Trading Co$.$ had left.

May $10$ Paid Nairobi Organic Wholesale Ltd$.$ for an order costing $$3,902,$ which arrived on April $27,2021,$ with credit terms of $2/15,$ n$/30\mathrm{.}5$

May $11$ Streetsville Health Food Co$-$op made a credit purchase of an assortment of Lakeshore's teas for $$756.$ Cost of the goods sold to the co$-$op was $$437.$

May $13$ Sold $ $4,229$ of merchandise to Upper CanadaFine Foods $($UCFF$)$on credit.

May $14$ Ordered a variety of herbs from Escarpment Herbs, Lakeshore's preferred local supplier. The herbs were shipped later that day. The cost of the order amounted to $$1,016$ and shipping charges were an additional $$68.$ Lakeshore had always made use of the generous discount terms offered by Escarpment Herbs in past orders$\mathrm{.}6$

May $17$ Signed for the arrivalof the order from Escarpment Herbs.

May $18$ Two bags of herbs from the May $14$ order were damaged. Returned the bags and Escarpment Herbs reduced Lakeshore's account by $$56.$

May $19$ Informed by purchasing manager at UCFF that $$168$ worth of product had been purchased in error. Goods were returned to Lakeshore this afternoon. Given that UCFF was a large and important customer of Lakeshore, UCFF's account would be adjusted accordingly.

May $22$ Cheque received from Streetsville Health Food Co$-$op for goods sold on May $11.$

May $25$ Shipment received from Mangrove TradingCo. $($ordered on May $4).$

May $26$ Electronic funds transfer sent to Escarpment Herbs for full payment of amount owed.

May $29$ Received $$1,350$ from UCFF in partialpayment of its outstanding account with the remainder promised to be paid in June.

May $31$ Cash sales for the month amounted to $$1,138.$

At the close of business on May $31,2021,$ Davis performed a physical inventory count. Based on this count, the total cost of goods remaining on hand was $$6,027.$

REQUIRED

Record, using a super$-$T$,$ all opening balances, transactions, and adjusting entries relating to Lakeshore's merchandising operations for the month ending May $31,2021.$

Prepare the revenue and cost of goods sold sections as they would appear on Lakeshore's statement of earnings for the month ending May $31,2021.$