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Question 6 (10 marks) The following are merchandising transactions of Wave Company, which applies the Periodic inventory system. July 3 Purchased merchandise from CAP Company

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Question 6 (10 marks) The following are merchandising transactions of Wave Company, which applies the Periodic inventory system. July 3 Purchased merchandise from CAP Company for RO. 15,000 under credit terms of 1/10, n/30, FOB destination. July 4 At CAP's request, Wave paid RO. 250 cash for freight charges on the July 3 purchase, reducing the amount owed to CAP. July 7 July 10 Sold merchandise to Morris Company for RO. 10,500 under credit terms of 2/10, n/60, FOB destination. The merchandise had cost RO. 7,500. Purchased merchandise from Dock Corporation for RO. 14,200 under credit terms of 1/10, n/45, FOB shipping point. The invoice showed that at Wave's request, Dock paid the RO. 600 shipping charges and added that amount to the bill. (Hint: Discounts are not applied to freight and shipping charges). Paid RO. 300 cash for shipping charges related to the July 7 sale to Morris Company. July 11 July 12 Morris returned merchandise from the July 7 sale that had cost Wave RO. 1,250 and been sold for RO. 1,750. The merchandise was restored to inventory. July 14 After negotiations with Dock Corporation concerning problems with the merchandise purchased on July 10, Wave received a credit memorandum from Dock granting a price reduction of RO. 2,000. Instructions: a) Prepare the journal entries to record all the above transactions. (8 Marks) b) Can a company change its inventory method each accounting period? Explain. (To answer this part, the words must be at least 100 words). (2 Marks) Question 2 (3 +2 = 5 marks) a) Opening Stock RO. 210000; Sales RO.400000; Fuel expenses RO. 7000; Furniture Purchased RO 50000, Returns Inwards RO. 3000; Gross Profit RO. 40000; Purchases RO. 100000; Returns outwards RO. 5000. Calculate the closing Stock and the cost of Goods Sold. b) Operating profit earned by Sugar Stores in 2016-2017 was RO. 580,000 its interest income during the year RO 17300 and loss due to discontinued operations during the year was RO18000. Calculate the amount of net profit earned by the firm

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