Accounting Transactions Analysis and Solutions for Happy Feet Ltd

School: Wilfrid Laurier University - Course: BU 127 - Subject: Accounting

Happy Feet Ltd. is the sole distributor of a popular brand of running shoes to local sporting stores in Southern Ontario. Happy Feet does not sell any products other than the single type of running shoes. On January 1, 2021, the company had the following opening account balances: Cash30,000 Accounts receivable (All from Store A)40,000 Allowance for doubtful accounts5,400 Inventory (500 pairs of shoes)35,000 Retained earnings102,500 Note: All accounts have normal balances. During the three months (quarter) ended March 31, 2021, the company had the following transactions: DateTransactionAmount Jan 7Sold 300 pairs of shoes to Store B on credit.45,000 Jan 11Purchased 200 pairs of shoes for cash.16,000 Jan 15Received payment from Store B in settlement of 50 percent ofthe accounts receivable from Jan. 11. ? Jan 22Sold 100 pairs of shoes to Store C on credit.16,000 Feb 18Received payment from Store A in settlement of accountsreceivable. 36,000 Feb 24Accepted a return of 50 pairs of shoes from Store C and creditwas given to the customer. 8,000 Mar 5The remaining balance of the amount owed by Store A waswritten off as uncollectible. ? Mar 15Purchased 350 pairs of shoes for cash.31,500 Mar 30Sold 300 pairs of shoes to store D on credit.48,000 Additional Information: a)Happy Feet provides the terms 2/10, net 30 for all its credit sales. b)Happy Feet uses the perpetual inventory method and the average cost method. c)Happy Feet Ltd. provides for uncollectible accounts as follows: Not yet due2% 1-30 days overdue4% 31-60 days overdue7% >60 days overdue10% d)There are no other transactions, revenues of expenses. Required: 1)Prepare all journal entries necessary to account for the above transactions. 2)Prepare a statement of earnings down to the gross profit line for the three months ending March 31, 2021.