Problem Set B 06-1, LO6-3, LO6-8 ROBLEM 6.1B valuating Profitability Big Oak Lumber is a lumber yard on Angel Island. Some of Big Oak s transactions during the cur- rent year are as follows. Apr. 15 Sold lumber on account to Hard Hat Construction, $19.700. The inventory subsidiary ledger Apr. 19 Purchased lumber on account from LHP Company, $3,700. May 10 Collected in cash the $19,700 account receivable from Hard Hat Construction shows the cost of this merchandise was $10,300. May 19 Paid the $3,700 owed to LHP Company Big Oak's personnel counted the inventory on hand and determined its cost to be $114,000. The accounting records, however, indicate inventory of $116.500 and a cost of goods sold of $721,000. physical count of the inventory was observed by the company's auditors and is considered correct Prepare journal entries to record these transactions and events in the accounting records of Big a partial income statement showing the company's gross profit for the year. (Net sales Instructions a. Oak Lumber. (The company uses a perpetual inventory system.) b. Prepare for the year amount to $1,422,000.) c. Big Oak purchases merchandise inventory at the same wholesale prices as other lumber yards Because of its remote location the company must pay between $8,000 and S18,000 per year in extra transportation charges to receive delivery of merchandise. (These additional charges are included in the amount shown as cost of goods sold.) Assume that an index of key business ratios in your library shows lumber yards of Big Oak's approxi- mate size (in total assets) average net sales of SI million per year and a gross profit rate of 22 percent. ls Big Oak able to pass its extra transportation costs on to its customers? Does the business appear to suffer or benefit financially from its remote location? Explain your reasoning and support your conclusions with specific accounting data comparing the operations of big Ouk Lumber with the industry averages. 1, LO6-2, LO63, 6,L06-8 BLEM 6.2B Harry's Haberdashery is a retail clothing store for men. The store operates out of a rented build- ing in Albertsville, Virginia. Shown as follows is the store's adjusted year-end trial balance dated December 31, current year