Answer:
Gross profit = $ 3950.
Explanation:
1.
July-3. Dr Merchandise Inventory 1750
Cr Accounts payable 1750
( To record purchase of inventory on account)
July-4. Dr Merchandise Inventory 120
Cr Cash 120
( To record payment of freight charges)
July-9 Dr Accounts payable 400
Cr Merchandise Inventory 400
( To record return of inventory)
July-11 Dr Accounts payable 1750
Cr Cash 1750
( To record payment from wholesale music in full)
July-12.a) Dr Cost of goods sold 2450
Cr Merchandise inventory 2450
b) Dr Account receivable 4700
Cr Sales revenue 4700
(To record sales of goods to a customer)
July-15. Dr Cash 4700
Cr Account receivable 4700
( To record receipt from sale of goods)
July-18 Dr Merchandise inventory 2550
Cr Accounts payable 2550
(To record purchase of inventory on account)
July-22.a) Dr Cost of goods sold 1950
Cr merchandise inventory 1950
Dr Account receivable 3650
Cr sales revenue 3650
(To record sales of goods on account)
July-28 Dr Accounts payable 190
Cr Merchandise inventory 190
(To record purchase return)
July-30. Dr Accounts payable 2550
Cr Cash 2550
(To record paid in full).
2. Income statement
Sales (4700+3650) = 8350
Less: Cost of goods sold (2450+1950) =(4400)
Gross profit 3950
The journal entries, when CD City uses a perpetual inventory system, are given in the image below.
The income statement in the books of CD city is given in the image below.
An income statement is also known as the profit and loss account. It is one of the financial statements of a company. It presents the company's revenues and expenses during a particular period.
It is in the form of a t-shaped account with the debit and the credit columns. It is the initial stage of financial statements.
Therefore, the journal entries and the income statement for the above company are shown in the image below.
Learn more about the income statement, refer to:
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