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.

Step by step solution

01

Meaning of Sales Returns

In accounting, sales returns refer to the goods returned by the customers. Sales returns occur when goods are not up to the mark, are defective, or are found damaged by the customers. Sales returns decrease the sales revenues of the business entity and are treated separately in the books.

02

Preparation of journal entries

Date	Accounts and Explanation	Debit ($)	Credit ($)
Jan 4	Merchandise inventory	5,000
	Accounts payable (Vanderbilt)		5,000
Jan 6	Freight-in	150
	Cash		150
Jan 8	Accounts payable (Vanderbilt)	2,500
	Merchandise inventory		2,500
Jan 10	Cash	1,100
	Sales revenue		1,100
Jan 10	Cost of goods sold	440
	Merchandise inventory		440
Jan 11	Accounts receivable (Gilmore)	10,100
	Sales revenue		10,100
Jan 11	Cost of goods sold	5,555
	Merchandise inventory		5,555
Jan 12	Delivery expense	30
	Cash		30
Jan 13	Accounts receivable (Cadet)	8,800
	Sales revenue		8,800
Jan 13	Cost of goods sold	4,400
	Merchandise inventory		4,400
Jan 14	Accounts payable (Vanderbilt) [5000-2500]	2,500
	Merchandise inventory (2500*1%)		25
	Cash		2,475
Jan 18	Merchandise inventory	4,600
	Accounts payable (Roberts)		4,600
Jan 20	Cash	9,797
	Sales discount (10100*3%)	303
	Accounts receivable (Gilmore)		10,100
Jan 26	Accounts payable (Roberts)	4,600
	Merchandise inventory (4600*1%)		46
	Cash		4,554
Jan 28	Cash	8,800
	Accounts receivable (Cadet)		8,800
Jan 29	Merchandise inventory	12,000
	Cash		12,000
Jan 29	Freight-in	240
	Cash		240

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