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Chapter 5: 2SE (page 325)

Journalize the following sales transactions for Sierra Tractors. Explanations are not required.

June 5 Sierra sold \(20,000 of inventory on account, credit terms are 4/10, n/30. Cost of goods is \)10,000. Sierra uses the gross method to record sales revenue.

12 Sierra receives payment from the customer on the amount due, less the discount.

Short Answer

Expert verified

The total of debits and credits is$50,000.

Step by step solution

01

Meaning of Discount

In accounting, a discount denotes thereduction in the price of the goods or services purchased or sold by a business concern. Discount is bifurcated into two categories for identifying the revenue or expense, i.e.,sales discount and purchase discount.

02

Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Jun 5

Accounts receivable

20,000

Sales revenue

20,000

Jun 5

Cost of goods sold

10,000

Merchandise inventory

10,000

Jun 12

Cash

19,200

Sales discount (20000*4%)

800

Accounts receivable

20,000

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Most popular questions from this chapter

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?

Journalize the following sales transactions for Antique Mall. Explanations are not required. The company estimates sales returns at the end of each month.

Jan. 4 Sold \(16,000 of antiques on the account; credit terms are n/30. The cost of goods is \)8,000.

8 Received a \(300 sales return on damaged goods from the customer. The cost of goods damaged is \)150.

13 Antique Mall received payment from the customer on the amount due from Jan. 4, less the return.

20 Sold \(4,900 of antiques on the account; credit terms are 1/10, n/45, FOB destination. The cost of goods is \)2,450.

20 Antique Mall paid $70 on freight out.

29 Received payment from the customer on the amount due from Jan. 20, less the discount.

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

July 1 Purchase of \(20,500 worth of computers on account, terms of 2/10, n/30.

3 Return of \)4,000 of the computers to the vendor.

9 Payment made on the account.

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

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’s October 2018 transactions.

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

What are the two types of merchandisers? How do they differ?
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