Reference no: EM13921169
AC1220 Lab 3.1
Introduction
In each of the first three months of operation, Jake's Computer Repair Service generates a small profit. Jones decides to sell computers in addition to providing repair services and renames the proprietorship Jake's Computer Sales and Repair to reflect this change. On April 1, 20x1, Jones enters into a purchase agreement with a computer equipment supplier and places an order for A-line tablet computers, a promising and affordable new product that the business will offer to the public.
The following transactions occur during April 20x1:
a. April 2, 20x1. Jake deposits an additional $35,000 into the business bank account in exchange for capital.
b. April 8, 20x1. The inventory shipment arrives at Jake's Computer Sales and Repair, and the invoice totals $28,000. The total includes shipping costs amounting to $200. Jake pays for the shipping costs upon delivery of the inventory. Shipping terms are 2/10 net 30.
c. April 15, 20x1. Inventory costing $18,000 is sold to customers for $20,700 (cash).
d. April 16, 20x1. Jake's Computer Sales and Repair makes cash payment in full settlement of inventory purchase on April 8; see transaction
b above-take credit terms into account.
e. April 18, 20x1. Another shipment of inventory arrives at Jake's Computer Sales and Repair, accompanied by the following invoice:
PC Supplier, Inc.
5555 N Drive
Ganesville, ID INVOICE NO.: 109
April 18, 20x1
Ship to: Jake's Computer Repair Service
7101 Summer Ln, Wembly, KA Terms: 2/10 net 30
Quantity Item Description Unit Price Total
150 A-line computer $205.00 $30,750
TOTAL $30,750
f. April 19, 20x1. Cash sales of inventory, $30,475 (cost: $26,500).
g. April 20, 20x1. Sold inventory to customer on account $10,810 (cost: $9,400). Credit terms on sales are: 3/15 net 30.
h. April 25, 20x1. Sales returns amounted to $1,265 (cost: $1,100). Refunded returns with cash.
i. April 25, 20x1. Customer makes payment $5,000 on account (see credit terms, April 20).
j. April 30, 20x1. Selling expenses amount to $1,980, and general expenses total an additional $1,560 (cash).
k. April 30, 20x1. Purchased store furniture, $31,000 (cash).
l. April 30, 20x1. Jake makes a cash withdrawal of $1,500.
m. Service revenues total $2,400 for April 20x1 (all cash).
Requirement 1
Jake's Computer Sales and Repair uses a perpetual inventory system. Journal entries have been made for transactions a, b, and c.
Journalize the remaining inventory transactions for April 20x1 in the space provided below:
DATE REF DEBIT CREDIT
April 2 Cash a $35,000
Capital, Jones a $35,000
To record capital contribution
8 Inventory b $28,000
Cash b $200
Accounts Payable b $27,800
To record purchase of inventory
15 Cash c $20,700
Cost of Goods Sold c $18,000
Sales Revenue c $20,700
Inventory c $18,000
To record cash sale
16 d
d
d
18 e
e
19 f
f
f
f
DATE REF DEBIT CREDIT
g
g
g
g
25 h
h
h
h
25 i
i
i
30 j
j
j
30 k
k
30 l
l
30 m
m
Requirement 2
Jake prepares the following trial balance as of April 30, 20x1:
Account Balance
Debit Credit
Cash $40,640
Accounts Receivable $6,520
Supplies $100
Inventory $5,390
Prepaid Advertising $800
Furniture $31,000
Equipment $6,200
Accounts Payable $32,290
Capital, Jones $43,010
Withdrawals, Jones $1,500
Interest Payable $120
Note Payable $10,000
Sales Revenue $64,485
Sales Returns & Allowances $1,265
Sales Discounts $150
Cost of Goods Sold $52,800
Selling Expenses $1,980
General Expenses $1,560
Total $149,905 $149,905
a. Prepare a Multistep Income Statement for Jake's Computer Sales and Repair for the month ended April 30, 20x1. Fill in the shaded cells in the following template, using the appropriate revenue and expense amounts obtained from the trial balance provided before:
Jake's Computer Sales and Repair
INCOME STATEMENT
For the Month Ended April 30, 20x1
Sales Revenue
Less:
Net Sales Revenue
Gross Profit
Less:
Operating Income
Net Income
b. Compute the gross profit percentage for Jake's Computer Sales and Repair for the month ended April 30, 20x1, using the appropriate amounts from the income statement prepared above.
The gross profit percentages for the main competitors of Jake's Computer Sales and Repair range from 0.05 to around 0.09. On the basis of the gross profit percentage you compute, comment briefly on the profitability of Jake's Computer Sales and Repair in relation to its competitors.
c. Compute the capital balance at Jake's Computer Sales and Repair as of April 30, 20x1, using data provided in the trial balance and the appropriate items from the income statement prepared earlier. Hint: recall the computation of ending capital in the statement of owner's equity.