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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

Describe FOB shipping point and FOB destination. When does the buyer take ownership of the goods, and who typically pays the freight?

What is an invoice?

Journalize the following sales transactions for King Company. Explanations are not required.

Apr. 1 King Company sold merchandise inventory for \(150. The cost of the inventory was \)90. The customer paid cash. King Company was running a promotion and the customer received a \(20 award at the time of sale that can be used at a future date on any King Company merchandise.

May 15 The customer uses the \)20 award when purchasing merchandise inventory for \(30. The cost of the inventory was \)18. The customer paid cash.

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.

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.
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