Answer:
CD City
a. Journal Entries, using perpetual inventory system:
July 3:
Debit Inventory $1,350
Credit Accounts Payable (Wholesale Music) $1,350
To record purchase of CDs on account, terms, 2/10, n/30.
July 4:
Debit Freight-in $110
Credit Cash $110
To record cash payment for freight.
July 9:
Debit Accounts Payable (Wholesale Music) $200
Credit Inventory $200
To record return of CDs.
July 11:
Debit Accounts Payable (Wholesale Music) $1,150
Credit Cash Discount $23
Credit Cash $1,127
To record full settlement on account.
July 12:
Debit Accounts Receivable $3,900
Credit Sales $3,900
To record sales of CDs on account.
Debit Cost of Goods Sold $2,050
Credit Inventory $2,050
To record the cost of sales.
July 15:
Debit Cash $3,900
Credit Accounts Receivable $3,900
To record cash receipt from customers.
July 18:
Debit Inventory $2,150
Credit Accounts Payable (Music Supply) $2,150
To record purchase of CDs on account, terms, 2/10, n/30.
July 22:
Debit Cash $3,250
Credit Sales $3,250
To record cash sales.
Debit Cost of Goods Sold $1,550
Credit Inventory $1,550
To record cost of sales.
July 28:
Debit Accounts Payable (Music Supply) $110
Credit Inventory $110
To record return of CDs.
July 30:
Debit Accounts Payable (Music Supply) $2,040
Credit Cash $2,040
To record full settlement.
b. Top Section of Multiple-step Income Statement for the month of July:
Sales $7,150
Cost of Goods Sold = ($3,600)
Gross Profit = $3,550
Explanation:
a) Sales
July 12 = $3,900
July 22 = $3,250
Total $7,150
b) Inventory
Beginning Balance = $2,450
July 3 purchase = 1,350
July 9 return = -200
July 12 cost of sales -2,050
July 18 purchase = 2,150
July 22 cost of sales -1,550
July 28 return = -110
Ending Balance = $2,040
c) Cost of Goods Sold
July 12 cost of sales $2,050
July 22 cost of sales 1,550
Total $3,600
.Therefore,initially Bill diner's opportunity cost of an additional hot dog is 1.4 units of burger.
approximately.Hence,Bill's diner is willing to sacrifice approximately 0.385 units of burger to consume an additional unit of hot dog.
units of burger.Notice,that here the opportunity cost of additional hot dog decreased from 1.4 units of burger to 0.385 units of burger as Bill's diner changed the consumption combination of both burgers and hot dogs.