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Chapter 5: Q6SE (page 296)

Suppose Piranha.com sells 3,500 books on account for \(17 each (cost of these books is \)35,700) on October 10, 2018 to The Textbook Store. One hundred of these books (cost $1,020) were damaged in shipment, so Piranha.com later received the damaged goods from The Textbook Store as sales returns on October 13, 2018.

Requirements

1. Journalize The Textbook Store鈥檚 October 2018 transactions.

2. Journalize Piranha.com鈥檚 October 2018 transactions. The company estimates sales returns at the end of each month.

Short Answer

Expert verified

Answer

The total of debits and credits for the Textbook Store is$61,200.

The total of debits and credits for Piranha.com is$97,920.

Step by step solution

01

Meaning of Journal Entries

The recording of business transactions in the tabular format is called journal entries. It follows thedual aspect concept of accountingand simultaneously reflects the transaction's debit and credit effect and chronologically records financial information.

02

Journal entries for The Textbook Store’s transactions

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Oct 10

Merchandise inventory (3,500*$17)

59,500

Accounts payable

59,500

(To record the purchases)

Oct 13

Accounts payable (100*$17)

1,700

Merchandise inventory

1,700

(To record the return of damaged goods)

03

Journal entries for Piranha.com’s transactions

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Oct 10

Accounts receivable

59,500

Sales revenue

59,500

(To record the sales)

Oct 10

Cost of goods sold

35,700

Merchandise inventory

35,700

(To record the cost of goods sold)

Oct 13

Sales revenue

1,700

Accounts receivable

1,700

(To record the sales returns)

Oct 13

Merchandise inventory

1,020

Cost of goods sold

1,020

(To record the cost of goods returned)

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Most popular questions from this chapter

On November 4, 2018, Cain Company sold merchandise inventory on account to Tarin Wholesalers, \(12,000, that cost \)4,800. Terms 3/10, n/30. On November 5, 2018, Tarin Wholesalers paid shipping of $30. Tarin Wholesalers paid the balance to Cain Company on November 13, 2018.

Requirements

1. Journalize Tarin Wholesaler鈥檚 November transactions.

2. Journalize Cain Company鈥檚 November transactions.

Click Computers has the following transactions in July related to the sale of merchandise inventory.

July 12 Sold computers on account for \(8,000 to a customer, terms 3/15, n/30. The cost of the computers is \)4,800.

26 Received payment from the customer on the balance due.

Journalize the sales transactions for Click Computers assuming the company uses the perpetual inventory system.

M Wholesale Company began the year with merchandise inventory of \(5,000. During the year, M purchased \)93,000 of goods and returned \(6,600 due to damage. M also paid freight charges of \)1,200 on inventory purchases. At year-end, M鈥檚 ending merchandise inventory balance stood at $17,200. Assume that M uses the periodic inventory system. Compute M鈥檚 cost of goods sold for the year.

Journalize the following transactions that occurred in January 2018 for Mike鈥檚 Amusements. Assume Mike鈥檚 uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.

Jan. 4 Purchased merchandise inventory on account from Vanderbilt Company, \(5,000. Terms 1/10, n/EOM, FOB shipping point.

6 Paid freight bill of \)150 on January 4 purchase.

8 Returned half the inventory purchased on January 4 from Vanderbilt Company.

10 Sold merchandise inventory for cash, \(1,100. Cost of goods, \)440. FOB destination.

11 Sold merchandise inventory to Gilmore Corporation, \(10,100, on account, terms of 3/10, n/EOM. Cost of goods, \)5,555. FOB shipping point.

12 Paid freight bill of \(30 on January 10 sale.

13 Sold merchandise inventory to Cadet Company, \)8,800, on account, terms of 3/10, n/45. Cost of goods, \(4,400. FOB shipping point.

14 Paid the amount owed on account from January 4, less return and discount.

18 Purchased inventory of \)4,600 on account from Roberts Corporation. Payment terms were 1/10, n/30, FOB destination.

20 Received cash from Gilmore Corporation, less discount.

26 Paid amount owed on account from January 18, less discount.

28 Received cash from Cadet Company.

29 Purchased inventory from Silk Corporation for cash, \(12,000, FOB shipping point. Freight in paid to shipping company, \)240.

Consider the following transactions for Toys and More:

May 8 Toys and More buys \(113,300 worth of MegoBlock toys on account with credit terms of 2/10, n/60.

12 Toys and More returns \)11,250 of the merchandise to MegoBlock due to damage during shipment.

15 Toys and More paid the amount due, less the return and discount.

Requirements

1. Journalize the purchase transactions. Explanations are not required.

2. In the final analysis, how much did the inventory cost Toys and More?
See all solutions

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