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Chapter 5: Q22E (page 301)

Journalize the following transactions for Soul Art Gift Shop. Explanations are not required.

Feb. 3 Purchased \(3,300 of merchandise inventory under terms 3/10, n/EOM, and FOB shipping point.

7 Returned \)900 of defective merchandise purchased on February 3.

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

10 Sold merchandise inventory on account for \)4,700. Payment terms were 2/15, n/30. These goods cost the company $2,350.

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$18,750.

Step by step solution

01

Meaning of Journalizing

In accounting, the term journalizing refers to recording a business’s financial transactions in the books of accounts. The journalizing process is applicable where the management adopts thedouble-entry bookkeeping format of accounting.

02

Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Feb 3

Merchandise inventory

3,300

Accounts payable

3,300

Feb 7

Accounts payable

900

Merchandise inventory

900

Feb 9

Freight-in

400

Cash

400

Feb 10

Accounts receivable

4,700

Sales revenue

4,700

Feb 10

Cost of goods sold

2,350

Merchandise inventory

2,350

Feb 12

Accounts payable (3300-900)

2,400

Cash (2400-3%*2400)

2,328

Merchandise inventory

72

Feb 28

Cash

4,606

Sales discount (2%*4700)

94

Accounts receivable

4,700

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Most popular questions from this chapter

When a company has a contract involving multiple performance obligations, how must the company recognize revenue?

What account is debited when recording a purchase of inventory when using the perpetual inventory system?

Match the accounting terms with the corresponding definitions.

1. Credit Terms a. The cost of the merchandise inventory that the business has sold to customers.

2. FOB Destination b. An amount granted to the purchaser as an incentive to keep goods that are not “as ordered.”

3. Invoice c. A type of merchandiser that buys merchandise either from a manufacturer or a wholesaler and then sells those goods to consumers.

4. Cost of Goods Sold d. A situation in which the buyer takes ownership (title) at the delivery destination point.

5. Purchase Allowance e. A type of merchandiser that buys goods from manufacturers and then sells them to retailers.

6. FOB Shipping Point f. A discount that businesses offer to purchasers as an incentive for early payment.

7. Wholesaler g. A situation in which the buyer takes title to the goods after the goods leave the seller’s place of business.

8. Purchase Discount h. The terms of purchase or sale as stated on the invoice.

9. Retailer i. A seller’s request for cash from the purchaser.

Describe the single-step income statement.

Taylor Department Store uses a periodic inventory system. The adjusted trial balance of Taylor Department Store at December 31, 2018, follows:

TAYLOR DEPARTMENT STORE

Adjusted Trial Balance

December 31, 2018

Balance

Account Title Debit Credit

Cash \(7,900

Accounts Receivable 85,300

Merchandise Inventory (beginning) 37,600

Office Supplies 300

Furniture 83,000

Accumulated Depreciation-Furniture \)18,500

Accounts Payable 28,500

Salaries Payable 2,900

Unearned Revenue 14,500

Notes Payable, long-term 32,000

Common Stock 20,000

Retained Earnings 45,400

Dividends 89,000

Sales Revenue 380,800

Purchases 284,000

Purchase Returns and Allowances 110,000

Purchase Discounts 7,000

Freight-In 100

Selling Expense 42,900

Administrative Expense 26,300

Interest Expense 3,200

Total \(659,600 \)659,600

Requirements

1. Prepare Taylor Department Store’s multi-step income statement for the year ended December 31, 2018. Assume ending Merchandise Inventory is $36,700.

2. Journalize Taylor Department Store’s closing entries.
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