Problem 2

Cindys Appliance Store uses a perpetual inventory system, and ending inventory at April 30 was $25,000. Following is a listing of transactions for Cindys for the month of May. Cindys purchased refrigerators from GE on account at a total cost of $500,000 with terms 2/10, n/30. Cindys also paid freight of $800 on the refrigerators purchased from GE. Several of the refrigerators had to be returned to GE, and GE issued a credit to Cindys for 10 refrigerators that cost $10,000. Cindys then paid the amount due to GE within 7 days of the invoice date. Lastly, Cindys sold refrigerators on account that had cost $250,000 for $375,000 to Marcs Pizza Palace.

Required: Answer the following questions for Cindys Appliance Store.

1. What is the balance in Cindys inventory account at the end of May?

2. What is Cindys gross margin for the month of May?