Sunland Company commenced operations on July 1. Sunland Company uses a periodic inventory system. During July, Sunland Company was involved in the following transactions and events:

July 2 Purchased $14,100 of merchandise from Suppliers Inc. on account, terms 2/10, n/30, FOB shipping point.

Returned $1,200 of merchandise to Suppliers Inc. as it was damaged. Received a credit on account from Suppliers.

4 Paid $540 of freight costs on July 2 shipment.

8 Sold merchandise for $2,300 cash.

11

Paid Suppliers Inc. the full amount owing.

15

Sold merchandise for $6,300 on account, 1/10, n/30, FOB shipping point.

25

Received full payment for the merchandise sold on July 15.

31

Sunland did a physical count and determined there was $9,600 of inventory on hand.(a)

Record the transactions in Sunland Company's books. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem. List all debit entries before credit entries.)

Date

Account Titles and Explanation

Debit

Credit

What was sunland gross profit for July

To record the transactions for Sunland Company, we'll create journal entries for each of the given transactions. We'll also calculate the gross profit for July at the end. Let's start with the journal entries:

### Journal Entries

1. **July 2:** Purchase of merchandise from Suppliers Inc. on account
   ```
   Date      | Account Titles and Explanation           | Debit   | Credit
   July 2    | Inventory                                | 14,100  |
             |     Accounts Payable                                | 14,100
   ```

2. **Return of damaged merchandise to Suppliers Inc.**
   ```
   Date      | Account Titles and Explanation           | Debit   | Credit
   July 2    | Accounts Payable                         | 1,200   |
             |     Inventory                                      | 1,200
   ```

3. **July 4:** Payment of freight costs
   ```
   Date      | Account Titles and Explanation           | Debit   | Credit
   July 4    | Freight-in                               | 540     |
             |     Cash                                           | 540
   ```

4. **July 8:** Sale of merchandise for cash
   ```
   Date      | Account Titles and Explanation           | Debit   | Credit
   July 8    | Cash                                     | 2,300   |
             |     Sales Revenue                                 | 2,300
   ```

5. **July 11:** Payment to Suppliers Inc.
   ```
   Date      | Account Titles and Explanation           | Debit   | Credit
   July 11   | Accounts Payable                         | 12,900  |
             |     Cash                                           | 12,642
             |     Purchase Discounts                            | 258
   ```

6. **July 15:** Sale of merchandise on account
   ```
   Date      | Account Titles and Explanation           | Debit   | Credit
   July 15   | Accounts Receivable                      | 6,237   |
             |     Sales Revenue                                 | 6,237
   ```

7. **July 25:** Received full payment for the merchandise sold on July 15
   ```
   Date      | Account Titles and Explanation           | Debit   | Credit
   July 25   | Cash                                     | 6,237   |
             |     Accounts Receivable                           | 6,237
   ```

8. **July 31:** Physical count of inventory
   ```
   Date      | Account Titles and Explanation           | Debit   | Credit
   July 31   | No Entry                                 | 0       | 0
   ```

### Calculation of Gross Profit for July

**Net Sales:**
   - Cash Sales: $2,300
   - Credit Sales: $6,237
   - Total Sales Revenue: $8,537

**Cost of Goods Sold (COGS):**
   - Purchases: $14,100
   - Less: Purchase Returns: $1,200
   - Net Purchases: $12,900
   - Add: Freight-in: $540
   - Cost of Goods Available for Sale: $13,440
   - Less: Ending Inventory: $9,600
   - COGS: $3,840

**Gross Profit:**
   - Net Sales: $8,537
   - Less: COGS: $3,840
   - Gross Profit: $4,697

Would you like more details or have any questions?

Here are five related questions you might want to ask:
1. How do you calculate the cost of goods sold?
2. What are the differences between periodic and perpetual inventory systems?
3. How do purchase discounts affect the cost of inventory?
4. What is the impact of FOB shipping point on accounting entries?
5. How does a physical inventory count affect financial statements?

**Tip:** Always verify the terms of purchase and sales transactions to ensure accurate recording of discounts and shipping costs.

Learn how to record transactions and calculate gross profit for Sunland Company in July using a periodic inventory system. Includes detailed journal entries and calculations of sales, cost of goods sold, and gross profit.

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