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Chapter 16: QA5C-3SE (page 859)

Question: Suppose Muddyriver.com sells 2,000 books on account for \(19 each (cost of these books is \)22,800), credit terms 1/20, n/45 on October 10, to The Salem Store. The Salem Store paid the balance to Muddyriver.com on October 22.

Requirements

1. Journalize the Salem Store鈥檚 October transactions.

2. Journalize Muddyriver.com鈥檚 October transactions. Assume Muddyriver.com uses the gross method to record sales revenue.

Short Answer

Expert verified

Answer

The total of debits and credits for Salem Store is$76,000.

The total of debits and credits for Muddyriver is$98,800.

Step by step solution

01

Meaning of Journal Entries

In accounting, journal entries are one of the processes of recording and maintaining thefinancial transactions of a business entity. It records the business transactions chronologically and helps the business to prepareledgers and trial balances

02

 Step 2: Preparation of journal entries for Salem Store

Date

Accounts and Explanation

Debit ($)

Credit ($)

Oct 10

Merchandise inventory

38,000

Accounts payable

38,000

(To record the purchase)

Oct 22

Accounts payable

38,000

Cash

37,620

Merchandise inventory

380

(To record the payment)

03

 Step 3: Preparation of journal entries for Muddyriver.com

Date

Accounts and Explanation

Debit ($)

Credit ($)

Oct 10

Accounts receivable

38,000

Sales revenue

38,000

(To record the sales)

Oct 10

Cost of goods sold

22,800

Merchandise inventory

22,800

(To record the cost of goods sold)

Oct 22

Cash

37,620

Sales discount (38000*1%)

380

Accounts receivable

38,000

(To record the receipt of payment)

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