An Auto Dealer Uses a Perpetual Inventory System

question 80

Essay

An auto dealer uses a perpetual inventory system.The dealer incurred the following transactions during the month of May:
1.On May 1,a dealer purchased 10 vehicles on account at $20,000 each,with credit terms of 2/10,net 30.
2.On May 2,the dealer returned one vehicle due to a product defect.
3.On May 3,the dealer sold 5 vehicles for $25,000 each on account to a local town.The credit terms were 3/10,net 30.
4.On May 9,the dealer paid for the vehicles purchased less the return on May 2.
5.On May 31,the dealer collected one-half of the amount due from the May 3 sale.
6.On May 31,the dealer paid the rent for the next month of $2,500.
Required:
Prepare the journal entries for the dealer during the month of May.Explanations are not required.

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Definitions:

CPI

Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

Structural Steel Beams

Steel shapes used in construction that are designed to bear heavy loads and form the skeleton of buildings and bridges.

Consumer Price Index

An index measuring the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Competitive

A market situation wherein there are many sellers and buyers, leading to prices that reflect supply and demand.