Response to the following problem:
Salem Corp. was incorporated on July 2, 2016 to operate a merchandizing business. Salem uses the perpetual inventory system. All its sales on account are made according to the following terms: 2/10, n30. Its transactions during July 2016 are as follows:
July 2 Issued share capital for $5,000 cash to George Salem, the incorporator and sole shareholder of the corporation
2 Purchased $3,500 merchandize on account from Blic Pens Ltd. for terms 2/10, n30
2 Sold $2,000 of merchandize on account to Spellman Chair Rentals Inc. (Cost to Salem: $1,200)
3 Paid Sayer Holdings Corp. $500 for July rent
5 Paid Easton Furniture Ltd. $1,000 for equipment
8 Collected $200 for a cash sale made today to Ethan Matthews Furniture Ltd. (Cost: $120)
8 Purchased $2,000 merchandize on account from Shaw Distributors Inc. for terms 2/15, n30
9 Received the amount due from Spellman Chair Rentals Inc. for the July 2 sale (less discount)
10 Paid Blic Pens Ltd. for the July 2 purchase (less discount)
10 Purchased $200 of merchandize on account from Peel Products Inc. for terms n30
15 Sold $2,000 of merchandize on account to Eagle Products Corp. (Cost: $1,300)
15 Purchased $1,500 of merchandize on account from Bevan Door Inc. for terms 2/10, n30
15 Received a memo from Shaw Distributors Inc. to reduce its account payable by $100 for defective merchandize included in the July 8 purchase.
16 Eagle Products Corp. returned $200 of merchandize: reduced related Account Payable. (Cost to Salem: $150)
20 Sold $3,500 of merchandize on account to Aspen Promotions Ltd. (Cost: $2,700)
20 Paid Shaw Distributors Inc. for half the purchase made July 8 (less memo amount, less discount on payment)
24 Received half the amount due from Eagle Products Corp. in partial payment for the July 15 sale (less discount on payment)
24 Paid Bevan Doors Ltd. for the purchase made July 15 (less discount)
26 Sold $600 merchandize on account to Longbeach Sales Ltd. (Cost: $400)
26 Purchased $800 of merchandize on account from Silverman Co. for terms 2/10, n30
31 Paid Speedy Transport Co. $350 for transportation to Salem's warehouse during the month (all purchases are fob shipping point).
1. Prepare journal entries to record the July transactions. Include general ledger account numbers and a brief description.
2. Calculate the ending balance in merchandize inventory.
3. Assume the merchandize inventory is counted at July 31 and assigned a total cost of $2,400. Prepare the July 31 adjusting entry. Show calculations.