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Chapter 5: 3SE (page 325)

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’s October transactions.

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

Short Answer

Expert verified

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 transactionsof a business entity. It records the business transactions chronologically and helps the business to prepare ledgers and trial balances.

02

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

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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Most popular questions from this chapter

Emerson St. Book Shop’s unadjusted Merchandise Inventory at June 30, 2018 was \(5,200. The cost associated with the physical count of inventory on hand on June 30, 2018, was \)4,900. In addition, Emerson St. Book Shop estimated approximately \(1,000 of merchandise sold will be returned with a cost of \)400.

Requirements

1. Journalize the adjustment for inventory shrinkage.

2. Journalize the adjustment for estimated sales returns.

The adjusted trial balance of Rockin Robbin Dance Company at April 30, 2018, follows:

ROCKIN ROBBIN DANCE COMPANY

Adjusted Trial Balance

April 30, 2018

Balance

Account Title Debit Credit

Cash \(4,400

Accounts Receivable 38,000

Merchandise Inventory 17,800

Office Supplies 850

Furniture 39,900

Accumulated Depreciation-Furniture \)8,300

Accounts Payable 14,100

Salaries Payable 1,000

Unearned Revenue 6,500

Notes Payable, long-term 12,000

Common Stock 5,000

Retained Earnings 36,150

Dividends 40,000

Sales Revenue 178,500

Cost of Goods Sold 83,700

Selling Expense 19,000

Administrative Expense 16,000

Interest Expense 1,900

Total \(261,550 \)261,550

Requirements

1. Prepare Rockin Robbin’s multi-step income statement for the year ended April 30, 2018.

2. Journalize Rockin Robbin’s closing entries.

3. Prepare a post-closing trial balance as of April 30, 2018.

What financial statement is merchandise inventory reported on, and in what section?

Journalize the following sales transactions for Sanborn Camera Store using the periodic inventory system. Explanations are not required.

Dec. 3, Sanborn sold $41,900 of camera equipment on the account; credit terms are 3/15, n/EOM.

17 Sanborn receives payment from the customer on the amount due to less the discount.

Highlight the differences in the closing process when using the periodic inventory system rather than the perpetual inventory system.
See all solutions

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