Purchase-Related Transactions

Journalize entries for the following related transactions of Lilly Heating & Air Company:

a. Purchased $25,000 of merchandise from Schell Co. on account, terms 2/10, n/30.

b. Paid the amount owed on the invoice within the discount period.

c. Discovered that $5,000 before purchases discount of the merchandise was defective and returned items, receiving credit.

d. Purchased $3,900 of merchandise from Schell Co. on account, terms n/30.

e. Received a check for the balance owed from the return in (c), after deducting for the purchase in (d).

Determining Gross Profit

During the current year, merchandise is sold for $609,000. The cost of the goods sold is $347,130.

a. What is the amount of the gross profit? $

b. Compute the gross profit percentage (gross profit divided by sales). Round to the nearest whole number. %

c. When will the income statement report net income?