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Problem 6- Needs to be on an excel spreadsheet - Accounting Majors ONLY
Hearthstone sells commercial kitchen equipment. At December 31, 2015, Hearthstone's inventory amounted to $750,000. During the first week of January 2016, the company made only one purchase and one sale. These transactions were as follows:
Purchased 90 machines from Rock Creek Corporation. The total cost of these machines was $60,000, terms 3/10, n/60.
Sold 45 different types of products on account to Harolds, Inc. The total sales price was $42,000, terms 5/10, n/90. The total cost of these 45 units to Hearthstone was $15,000 (net of the purchase discount).
Hearthstone has a full-time accountant and a computer-based accounting system. It records sales at the gross sales price and purchases at net cost and maintains subsidiary ledgers for accounts receivable, inventory, and accounts payable.
- Briefly describe the operating cycle of a merchandising company. Identify the assets and liabilities directly affected by this cycle.
- Prepare journal entries to record these transactions, assuming Hearthstone uses a perpetual inventory system.
- Explain the information in part b that should be posted to subsidiary ledger accounts.
- Compute the balance in the Inventory control account at the close of business on January 10.
- Prepare journal entries to record the two transactions, assuming that Hearthstone uses a periodic inventory system.
- Compute the cost of goods sold for the two weeks of January assuming use of the periodic system. (Use your answer to part d as the ending inventory.)
- Which type of inventory system do you think Hearthstone most likely would use? Explain your reasoning.
- Compute the gross profit margin on the January 10 sales transaction. [Round your answer to one decimal place.]
The excel speadsheet I have attached is the format that I need and the journal
Solution to Problem set 6.8B ----Problem 6.8B Gross profit is $27,000 (part h).