TUTORIAL TEST 5

T3_2022

Question 1: Company A distributes books to retail stores and extend credit terms of 5/15, n/30
to all of its customers. At the end of August, company inventory consisted of books purchased
for $3,000. During September, the following merchandising transactions occurred.

1) Sep 1, Purchased books on account for $2,800 from Nha Nam Publishers, FOB
destination, terms 2/10, n/30. The appropriate party also made a cash payment of $50 for
the freight on this date.
2) Sep 3, Sold books on account to Lady Clound bookstore for $3,700. The cost of the
books sold was $2,640.
3) Sep 6, Received $300 credit for books returned to Nha Nam Publishers
4) Sep 9, Paid Nha Nam Publishers in full, less discount
5) Sep 15, Received payment in full from Lady Clound bookstore
6) Sep 17, Sold books on account to Love Books for $3,000. The cost of the books sold was
$2,280
7) Sep 20, Purchased books on account for $3,000 from Vietnam Publishers, FOB
destination, terms 2/15,n/30. The appropriate party also made a cash payment of $60 for
the freight on this date.
8) Sep 24, Received payment in full from Love Books
9) Sep 26, Paid Vietnam Publishers in full, less discount
10) Sep 28, Sold books on account to Nana Bookstore for $2,800. The cost of the books
sold was $2,170
11) Sep 30, Granted Baeton Bookstore $500 credit for books returned costing $380.

Journalize the transactions for the month of September for Company A using a perpetual
inventory system, then post to the T-account. What are the advantages of the Perpetual
Inventory System?
Question 2: In its income statement for the year ended December 31, 2021, WSU Company
reported the following data.

1. Prepare a Multiple-step income statement

2. Prepare a single-step income statement
3. Why do we need to prepare the Multiple-step Income Statement?