Accounting for the purchase and sale of merchandise:
Nomoto Cars is an automobile dealership. Prepare journal entries to record these transactions. Then, based on the journal entries, determine the total profit Nomoto made on the sales.
1. Nomoto receives 14 automobiles from a manufacturer and puts them into its inventory for resale. Nomoto bought the autos on credit for $22,000 each.
2. During the following week, Nomoto sells five of the automobiles for $26,000 each. The customers pay in cash.
(Hint: Prepare two journal entries, one to record the sale proceeds and one to record the cost of the autos sold. For the second entry, debit the account Cost of goods sold.)