Movie Buy purchases merchandise inventory by the crate; each crate of inventory is a unit. The fiscal year of Movie Buy ends each February 28. Assume you are dealing with a single Movie Buy store in

Regina, Saskatchewan, and that the store experienced the following: The store began fiscal year

2014 with an inventory of 20,000 units that cost a total of $1,000,000.

During the year, the store purchased merchandise on account as follows:

April (29,000 units @ cost of $54). . . . . . . . . .	$1,566,000
August (49,000 units @ cost of $58). . . . . . . . .	2,842,000
November (59,000 units @ cost of $64). . . . . .	3,776,000
Total purchases. . . . . . . . . . . . . . . . . . . . . . .	$8,184,000

Cash payments on account totalled $7,784,000. During fiscal year 2014,

the store sold 148,000 units of merchandise for $14,208,000. Cash accounted for $5,500,000

of this, and the balance was on account. Movie Buy uses the FIFO method for inventories. Operating expenses for the year were $4,000,000. The store paid 80% in cash and accrued the rest as accrued liabilities. The store accrued income tax at the rate of 40 %.

Requirement 1. Make summary journal entries to record the store's transactions for the year ended

February 28 2016. Movie Buy uses a perpetual inventory system.

Let's start with the entry to record the purchases. (Record debits first, then credits. Explanations are not required.)

Journal Entry
Date		Accounts	Debit	Credit
Feb	28

Next, record the cash payments on account.

Journal Entry
Date		Accounts	Debit	Credit
Feb	28

Now record the cash received from sales and the balance on account. (Do not yet record the cost related to the sale. We will do this in the next journal entry.)

Journal Entry
Date		Accounts	Debit	Credit
Feb	28

Record the inventory transaction associated with the sale of merchandise. (Round your answer to the nearest whole dollar.)

Journal Entry
Date		Accounts	Debit	Credit
Feb	28

Now record the operating expenses. (Round your final answers to the nearest whole dollar.)

Journal Entry
Date		Accounts	Debit	Credit
Feb	28

Finally, record the entry to accrue income tax. (Round your final answers to the nearest whole dollar.)

Journal Entry
Date		Accounts	Debit	Credit
Feb	28

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. (Abbreviation used: COGS = cost of goods sold. Leave any unused cells blank.)

Inventory

Requirement 3. Prepare the store's income statement for the year ended

February 28, 2014.

Show totals for gross profit, income before tax, and net income.

		Movie Buy Store in Regina, Saskatchewan
		Income Statement
		For the Year Ended February 28, 2014
	Net income