Question

Recording Sales Transactions: Mathis Company and Roece Company use the perpetual inventory system. The following transactions occurred during the month of April:

a. On April 1, Mathis purchased merchandise for $10,000 on credit from a supplier.
b. On April 2, Roece purchased merchandise for $8,000 on credit from a different supplier.
c. On April 5, Mathis sold merchandise to a customer for $6,000, receiving $3,000 in cash and the remainder on credit.
d. On April 8, Roece sold merchandise to a customer for $7,500, receiving $4,000 in cash and the remainder on credit.
e. On April 12, Mathis collected the amount owed by the customer from the April 5 transaction.
f. On April 16, Roece collected the amount owed by the customer from the April 8 transaction.

Answer 1

Mathis Company and Roece Company utilize the perpetual inventory system to monitor purchases and sales, including transactions on credit and cash collections. An example self-check question shows how to calculate accounting profit by subtracting explicit costs from total revenues, leading to an accounting profit of $50,000.

Step-by-step explanation:

Mathis Company and Roece Company use the perpetual inventory system to record their transactions. These transactions include purchases and sales on credit, as well as cash collections from customers. Specifically, for Mathis Company:

• On April 1, Mathis made a credit purchase of merchandise worth $10,000.
• On April 5, the company sold merchandise for $6,000, receiving $3,000 in cash and the remaining $3,000 on credit.
• Mathis collected the owed amount from the customer on April 12.

For Roece Company:

• On April 2, Roece made a credit purchase of merchandise worth $8,000.
• On April 8, the company sold merchandise for $7,500, receiving $4,000 in cash and the remaining $3,500 on credit.
• Roece collected the owed amount from the customer on April 16.

To illustrate the concept further, we can refer to a self-check question:

If a firm had sales revenue of $1 million last year, and spent $600,000 on labor, $150,000 on capital, and $200,000 on materials, the firm's accounting profit would be calculated as follows:

Accounting profit = Total Revenues - Explicit Costs = $1,000,000 - ($600,000 + $150,000 + $200,000) = $50,000.