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Chapter 5: 5E (page 325)

Journalize the following transactions for Santa Fe Art Gift Shop. Assume Santa Fe uses the gross method to record sales revenue. Explanations are not required.

Feb. 3 Purchased \(2,800 of merchandise inventory on account under terms 3/10, n/EOM and FOB shipping point.

7 Returned \)700 of defective merchandise purchased on February 3.

9 Paid freight bill of \(400 on February 3 purchase.

10 Sold merchandise inventory on account for \)4,800. Payment terms were 1/15, n/30. These goods cost the company $2,400.

12 Paid amount owed on credit purchase of February 3, less the return and the discount.

28 Received cash from February 10 customer in full settlement of their debt.

Short Answer

Expert verified

The total of debits and credits is$18,000.

Step by step solution

01

Meaning of Sales Revenue

In accounting, sales revenue refers to the amount of money generated by a business concerned by selling goods or services to the customers. Sales revenue is considered to be anoperating income and is the primary source of generating revenues.

02

Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Feb 3

Merchandise inventory

2,800

Accounts payable

2,800

Feb 7

Accounts payable

700

Merchandise inventory

700

Feb 9

Freight-in

400

Cash

400

Feb 10

Accounts receivable

4,800

Sales revenue

4,800

Feb 10

Cost of goods sold

2,400

Merchandise inventory

2,400

Feb 12

Accounts payable (2800-700)

2,100

Cash

2,037

Merchandise inventory (2100*3%)

63

Feb 28

Cash

4,800

Accounts receivable

4,800

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Most popular questions from this chapter

Under the new revenue recognition standard, how is the sale of inventory recorded?

The unadjusted trial balance for Tuttle Electronics Company follows:

TUTTLE ELECTRONICS COMPANY

Unadjusted Trial Balance

October 31, 2018

Balance

Account Title Debit Credit

Cash \(4,200

Accounts Receivable 33,800

Merchandise Inventory 45,700

Office Supplies 5,700

Equipment 129,500

Accumulated Depreciation-Equipment \)37,200

Accounts Payable 15,600

Unearned Revenue 13,400

Notes Payable, long-term 53,000

Common Stock 48,000

Retained Earnings 6,700

Dividends 27,000

Sales Revenue 300,300

Cost of Goods Sold 171,600

Salaries Expense (Selling) 26,000

Rent Expense (Selling) 15,400

Salaries Expense (Administrative) 4,800

Utilities Expense (Administrative) 10,500

Total \(474,200 \)474,200

Requirements

1. Journalize the adjusting entries using the following data:

a. Interest revenue accrued, \(550.

b. Salaries (Selling) accrued, \)2,800.

c. Depreciation Expense—Equipment (Administrative), \(1,295.

d. Interest expense accrued, \)1,500.

e. A physical count of inventory was completed. The ending Merchandise Inventory should have a balance of \(45,300.

f. Tuttle estimates that approximately \)6,200 of merchandise sold will be returned with a cost of $2,480.

2. Prepare Tuttle Electronics’s adjusted trial balance as of October 31, 2018.

3. Prepare Tuttle Electronics’s multi-step income statement for year ended October 31, 2018.

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’s November transactions.

2. Journalize Cain Company’s November transactions.

What are the two journal entries involved when recording the sale of inventory when using the perpetual inventory system?

The adjusted trial balance of Rachael Rey Music Company at June 30, 2018, follows:

RACHAEL REY MUSIC COMPANY

Adjusted Trial Balance

June 30, 2018

Balance

Account Title Debit Credit

Cash \(4,000

Accounts Receivable 38,400

Merchandise Inventory 18,100

Office Supplies 300

Furniture 39,900

Accumulated Depreciation-Furniture \)8,200

Accounts Payable 13,800

Salaries Payable 850

Unearned Revenue 7,500

Notes Payable, long-term 17,000

Common Stock 6,000

Retained Earnings 21,350

Dividends 40,000

Sales Revenue 184,000

Cost of Goods Sold 85,500

Selling Expense 18,600

Administrative Expense 12,000

Interest Expense 1,900

Total \(258,700 \)258,700

Requirements

1. Prepare Rachael Rey’s multi-step income statement for the year ended June 30, 2018.

2. Journalize Rachael Rey’s closing entries.

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

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