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Chapter 5: QA5C-5E (page 249)

Question: 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

Answer

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 the journal entry(ies) when recording a sale of inventory using the periodic inventory system.

Journalize the following sales transactions for Morris Supply. Explanations are not required.

Mar. 1 Morris Supply sold merchandise inventory for \(3,000. The cost of the inventory was \)1,800. The customer paid cash. Morris Supply was running a promotion, and the customer received a \(150 award at the time of sale that can be used at a future date on any Morris Supply merchandise.

3 Sold \)6,000 of supplies on account. Credit terms are 2/10, n/45, FOB destination. The cost of goods is \(3,600.

10 Received payment from the customer on the amount due from March 3, less the discount.

Apr. 15 The customer used the \)150 award when purchasing merchandise inventory for \(200; the inventory cost was \)120. The customer paid cash.

Journalize the following transactions that occurred in March 2018 for Double Company. Assume Double uses the periodic inventory system. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Double estimates sales returns at the end of each month.

Mar. 3 Purchased merchandise inventory on account from Sidecki Wholesalers, \(5,500. Terms 2/15, n/EOM, FOB shipping point.

4 Paid freight bill of \)70 on March 3 purchase.

4 Purchased merchandise inventory for cash of \(1,100.

6 Returned \)900 of inventory from March 3 purchase.

8 Sold merchandise inventory to Herrick Company, \(3,400, on account. Terms 1/15, n/35.

9 Purchased merchandise inventory on account from Tex Wholesalers, \)5,600. Terms 2/10, n/30, FOB destination.

10 Made payment to Sidecki Wholesalers for goods purchased on March 3, less return and discount.

12 Received payment from Herrick Company, less discount.

13 After negotiations, received a \(500 allowance from Tex Wholesalers.

15 Sold merchandise inventory to Jesper Company, \)1,700, on account. Terms n/EOM.

22 Made payment, less allowance, to Tex Wholesalers for goods purchased on March 9.

23 Jesper Company returned \(300 of the merchandise sold on March 15.

25 Sold merchandise inventory to Salter for \)1,000 on account. Terms of 1/10, n/30 was offered, FOB shipping point.

29 Received payment from Salter, less discount.

30 Received payment from Jesper Company, less return.

Journalize the following sales transactions for Sierra Tractors. Explanations are not required.

June 5 Sierra sold \(20,000 of inventory on account, credit terms are 4/10, n/30. Cost of goods is \)10,000. Sierra uses the gross method to record sales revenue.

12 Sierra receives payment from the customer on the amount due, less the discount.

What is a purchase return? How does a purchase allowance differ from a purchase return?
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