Latona Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Latona showed Cash of $5,000 and Common Stock of $5,000.

Latona Hardware's chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 126 Supplies, No. 201 Accounts Payable, No. 311 Common Stock, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold.

A. Journalize the transactions using a perpetual inventory system.

B. Enter the beginning cash and common stock balances and post the transactions. (Use J1 for the journal reference.)

C. Prepare an income statement through gross profit for the month of May 2015. (Check Figure: Gross Profit $2,379)

(a)	General Journal						J1
Date	Account Titles				Ref.	Debit	Credit
May 1
2
5
9
10
11
12
15
17
19
24
(a) (Continued)		General Journal					J1
Date	Account Titles				Ref.	Debit	Credit
May 25
27
29
31

(b)		Page 263
Cash							No. 101
Date	Explanation			Ref.	Debit	Credit	Balance
May 1	Balance						5,000
Accounts Receivable							No. 112
Date	Explanation			Ref.	Debit	Credit	Balance
Inventory							No. 120
Date	Explanation			Ref.	Debit	Credit	Balance
Supplies							No. 126
Date	Explanation			Ref.	Debit	Credit	Balance
Accounts Payable							No. 201
Date	Explanation			Ref.	Debit	Credit	Balance
Common Stock							No. 311
Date	Explanation			Ref.	Debit	Credit	Balance
May 1	Balance						5,000
Sales Revenue							No. 401
Date	Explanation			Ref.	Debit	Credit	Balance
Sales Returns and Allowances							No. 412
Date	Explanation			Ref.	Debit	Credit	Balance
Sales Discounts							No. 414
Date	Explanation			Ref.	Debit	Credit	Balance
Cost of Goods Sold							No. 505
Date	Explanation			Ref.	Debit	Credit	Balance

(c)	Page 263
Latona Hardware Store
Income Statement (Partial)
For the Month Ended May 31, 2015

May 1 Purchased merchandise on account from Grays Wholesale Supply $4,200, terms 2/10, n/30 2 Sold merchandise on account $2,100, terms 1/10, n/30. The cost of the merchandise sold was $1,300 5 Received credit from Grays Wholesale Supply for merchandise returned $300. 9 Received collections in full, less discounts, from customers billed on sales of $2,100 on May 2. 10 Paid Gray's Wholesale Supply in full, less discount. 11 Purchased supplies for cash $400. 12 Purchased merchandise for cash $1,400. 15 Received refund for poor quality merchandise from supplier on cash purchase $150. 17 Purchased merchandise from Amland Distributors $1,300, FOB shipping point, terms 2/10, n/30. 19 Paid freight on May 17 purchase $130. 24 Sold merchandise for cash $3,200. The merchandise sold had a cost of $2,000. 25 Purchased merchandise from Horvath, Inc. $620, FOB destination, terms 2/10, n/30. 27 Paid Amland Distributors in full, less discount. 29 Made refunds to cash customers for defective merchandise $70. The returned merchandise had a fair value of $30. 31 Sold merchandise on account $1,000 terms n/30. The cost of the merchandise sold was $560