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Chapter 5: 1SE (page 325)

Journalize the following sales transactions for Paul Sportswear. Explanations are not required.

Aug. 1 Paul sold \(66,000 of women’s sportswear on account, credit terms are 2/10, n/30. Cost of goods is \)33,000. Paul uses the gross method to record sales revenue.

25 Paul receives payment from the customer on the amount due.

Short Answer

Expert verified

The total of debits and credits is$165,000.

Step by step solution

01

Meaning of Accounts Receivable

The accounting term accounts receivable indicates the customers to whom sales are made on acredit basis, and the amount is yet to be received. It is considered an asset and reported under thecurrent asset section of thepositional statement.

02

Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Aug 1

Accounts receivable

66,000

Sales revenue

66,000

Aug 1

Cost of goods sold

33,000

Merchandise inventory

33,000

Aug 25

Cash

66,000

Accounts receivable

66,000

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Most popular questions from this chapter

Howie Jewelers had the following purchase transactions. Journalize all necessary transactions. Explanations are not required.

Jun. 20 Purchased inventory of \(5,100 on account from Sanders Diamonds, a jewelry importer. Terms were 2/15, n/45, FOB shipping point.

20 Paid freight charges, \)400.

Jul. 4 Returned \(600 of inventory to Sanders.

14 Paid Sanders Diamonds, less return.

16 Purchased inventory of \)3,500 on account from Southboro Diamonds, a jewelry importer. Terms were 2/10, n/EOM, FOB destination.

18 Received a $300 allowance from Southboro Diamonds for damaged but usable goods.

24 Paid Southboro Diamonds, less allowance, and discount.

Journalize the following transactions that occurred in March 2018 for Double Company. Assume Double uses the periodic inventory system. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Double estimates sales returns at the end of each month.

Mar. 3 Purchased merchandise inventory on account from Sidecki Wholesalers, \(5,500. Terms 2/15, n/EOM, FOB shipping point.

4 Paid freight bill of \)70 on March 3 purchase.

4 Purchased merchandise inventory for cash of \(1,100.

6 Returned \)900 of inventory from March 3 purchase.

8 Sold merchandise inventory to Herrick Company, \(3,400, on account. Terms 1/15, n/35.

9 Purchased merchandise inventory on account from Tex Wholesalers, \)5,600. Terms 2/10, n/30, FOB destination.

10 Made payment to Sidecki Wholesalers for goods purchased on March 3, less return and discount.

12 Received payment from Herrick Company, less discount.

13 After negotiations, received a \(500 allowance from Tex Wholesalers.

15 Sold merchandise inventory to Jesper Company, \)1,700, on account. Terms n/EOM.

22 Made payment, less allowance, to Tex Wholesalers for goods purchased on March 9.

23 Jesper Company returned \(300 of the merchandise sold on March 15.

25 Sold merchandise inventory to Salter for \)1,000 on account. Terms of 1/10, n/30 was offered, FOB shipping point.

29 Received payment from Salter, less discount.

30 Received payment from Jesper Company, less return.

When a company has a contract involving multiple performance obligations, how must the company recognize revenue?

Journalize the following transactions that occurred in January 2018 for Mike’s Amusements. Assume Mike’s 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.

Rae Philippe was a warehouse manager for Atkins Oilfield Supply, a business that operated across eight Western states. She was an old pro and had known most of the other warehouse managers for many years. Around December each year, auditors would come to do a physical count of the inventory at each warehouse. Recently, Rae’s brother started his own drilling company and persuaded Rae to “loan” him 80 joints of 5-inch drill pipe to use for his first well. He promised to have it back to Rae by December, but the well encountered problems and the pipe was still in the ground. Rae knew the auditors were on the way, so she called her friend Andy, who ran another Atkins warehouse. “Send me over 80 joints of 5-inch pipe tomorrow, and I’ll get them back to you ASAP,” said Rae. When the auditors came, all the pipe on the books was accounted for, and they filed a “no-exception” report.

Requirements

1. Is there anything the company or the auditors could do in the future to detect this kind of fraudulent practice?

2. How would this kind of action affect the financial performance of the company?
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