Preston Stores Inc. completed the following transactions during the current year, the company's first year of operations. Preston Stores has a December 31 year-end.

Requirements

A. Prepare the journal entries required to record the transactions listed above. Assume a perpetual inventory system is used.

B. Prepare a partial income statement for the current fiscal year.

September 2: Purchased $66,000 of merchandise inventory from Anderson Company using a trade note payable. The not is due in three months and carries an 6% annual interest rate.

Proper Account	Debit
Proper Account		Credit

September 21: Purchased $392,000 of inventory from various suppliers on account.

Proper Account	Debit
Proper Account		Credit

October 12: Sold merchandise that cost $87,000 for $137,000 on account.

Begin by journalizing the sale of the merchandise. Do not record the expense related to the sale. We will do that in a following step.

Proper Account	Debit
Proper Account		Credit

Now journalize the expense related to the October 12 sale.

Proper Account	Debit
Proper Account		Credit

October 16: Sold $4,100 of gift cards and received cash.

Proper Account	Debit
Proper Account		Credit

November 16: Paid for all the items purchased on September 21.

Proper Account	Debit
Proper Account		Credit

December 2: Paid off the trade note payable plus interest.

Proper Account	Debit
Proper Account		Credit

December 15: Redeemed gift cards totaling $3700 from customers who purchased merchandise costing $2300.

Begin by journalizing the gift card redemption. Do not record the expense related to the sale. We will do that in the following step.

Proper Account	Debit
Proper Account		Credit

Now journalize the expense related to the December 15 sale.

Proper Account	Debit
Proper Account		Credit

December 31: Used the proportional method to account for breakage. Its estimated breakage rate is 6%.

Proper Account	Debit
Proper Account		Credit

Requirement B.

Prepare the partial income statement for the current fiscal year.

Review the journal entries prepared in Requirement A.

Preston Stores Inc.

Partial Income Statement

For the Four Months Ended December 31

Proper Account	$$$$$
Proper Account	$$$$$
Proper Account	$$$$$
Proper Account	$$$$$