At the beginning of July, CD City has a balance in inventory of $2,800. The following transactions occur during the month of July.
|July 3||Purchase CDs on account from Wholesale Music for $1,700, terms 1/10, n/30.|
|July 4||Pay freight charges related to the July 3 purchase from Wholesale Music, $100.|
|July 9||Return incorrectly ordered CDs to Wholesale Music and receive credit, $300.|
|July 11||Pay Wholesale Music in full.|
|July 12||Sell CDs to customers on account, $4,600, that had a cost of $2,400.|
|July 15||Receive full payment from customers related to the sale on July 12.|
|July 18||Purchase CDs on account from Music Supply for $2,500, terms 1/10, n/30.|
|July 22||Sell CDs to customers for cash, $3,600, that had a cost of $1,900.|
|July 28||Return CDs to Music Supply and receive credit of $180.|
|July 30||Pay Music Supply in full.|
1. Assuming that CD City uses a perpetual inventory system, record the transactions.
2. Prepare the top section of the multiple-step income statement through gross profit for the month of July.