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The following are the sales transactions of EcoMart Merchandising. EcoMart uses a perpetual inventory system and the gross method.

October 1 Sold merchandise for , with credit terms , invoice dated October 1 . The cost of the merchandise is .
October 6 The customer in the October 1 sale returned of merchandise for full credit. The merchandise, which had cost , is returned to inventory.
October 9 sold merchandise for cash. Cost of the merchandise is .
October 30 Received payment for the amount due from the October 1 sale less the return on October 6.

Use the above transactions, to analyze each transaction by indicating its effects on the components of the income statementspecifically, identify the accounts and amounts (including + or - ) for each transaction.

Ask by Powers Chambers. in the United States

Mar 20,2025

Question

Required information
[The following information applies to the questions displayed below.]
The following are the sales transactions of EcoMart Merchandising. EcoMart uses a perpetual inventory system and the gross method.

October 1 Sold merchandise for , with credit terms , invoice dated October 1 . The cost of the merchandise is .
October 6 The customer in the October 1 sale returned of merchandise for full credit. The merchandise, which had cost , is returned to inventory.
October 9 sold merchandise for cash. Cost of the merchandise is .
October 30 Received payment for the amount due from the October 1 sale less the return on October 6.

Use the above transactions, to analyze each transaction by indicating its effects on the components of the income statementspecifically, identify the accounts and amounts (including + or - ) for each transaction.

Ask by Powers Chambers. in the United States

Mar 20,2025

UpStudy AI · Accepted Answer

### Transaction 1 – October 1  
**Sales Event:**  
- **Sales Revenue:**  
  - Increase by $$+1,\!800$$  
- **Cost of Goods Sold (COGS):**  
  - Increase by $$+1,\!050$$

*Explanation:* EcoMart records the full sale at its invoice amount, and under a perpetual system, the cost of goods sold is recorded at the cost of the merchandise transferred out.

---

### Transaction 2 – October 6  
**Sales Return:**  
- **Sales Revenue (contra account, Sales Returns and Allowances):**  
  - Decrease by $$-180$$  
- **Cost of Goods Sold (COGS) Adjustment:**  
  - Decrease by $$-105$$

*Explanation:* The customer returns merchandise, reducing the previously recorded sale by $$ \$180 $$ and the related cost of goods sold by $$ \$105 $$. Inventory is increased accordingly, but for income statement purposes the return reduces sales revenue and the COGS expense is reversed.

---

### Transaction 3 – October 9  
**Cash Sale:**  
- **Sales Revenue:**  
  - Increase by $$+850$$  
- **Cost of Goods Sold (COGS):**  
  - Increase by $$+570$$

*Explanation:* For the cash sale, EcoMart records a revenue of $$ \$850 $$ and the corresponding cost, $$ \$570 $$, which when subtracted gives the gross profit effect.

---

### Transaction 4 – October 30  
**Receipt of Payment:**  
- **Income Statement Impact:**  
  - None

*Explanation:* The collection of cash for the October 1 sale (net of the return) is a balance sheet transaction that does not affect the income statement. Under the gross method with terms $$ n/30 $$, no sales discount is involved, so the revenue and COGS recognized earlier remain unchanged.
### Transaction 1 – October 1 - **Sales Revenue:** +\$1,800 - **Cost of Goods Sold (COGS):** +\$1,050 ### Transaction 2 – October 6 - **Sales Revenue:** -\$180 - **Cost of Goods Sold (COGS):** -\$105 ### Transaction 3 – October 9 - **Sales Revenue:** +\$850 - **Cost of Goods Sold (COGS):** +\$570 ### Transaction 4 – October 30 - **No Impact on Income Statement**

Solución de inteligencia artificial de Upstudy

Responder

Transaction 1 – October 1

Transaction 2 – October 6

Transaction 3 – October 9

Transaction 4 – October 30

Solución

The Deep Dive

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