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Chapter 5: QA5C-ITI (page 249)

Question: Click Computers has the following transactions in July related to the sale of merchandise inventory.

July 12 Sold computers on account for \(8,000 to a customer, terms 3/15, n/30. The cost of the computers is \)4,800. Click uses the gross method for recording sales revenue.

26 Received payment from the customer on balance due.

Journalize the sales transactions for Click Computers assuming the company uses the perpetual inventory system.

Short Answer

Expert verified

Answer

The total of debits and credits is$20,800.

Step by step solution

01

Meaning of Sales

In accounting, the term sales refer to the process of transferring the ownership associated with the goods or services. Under such a process, theseller transfers the ownership in the buyer’s favor against a predetermined amount ofconsideration.

02

Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Jul 12

Accounts receivable

8,000

Sales revenue

8,000

(To record the sales on account)

Jul 12

Cost of goods sold

4,800

Merchandise inventory

4,800

(To record the cost of goods sold)

Jul 26

Cash

8,000

Accounts receivable

8,000

(To record the receipt of payment)

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Most popular questions from this chapter

Journalize the following transactions that occurred in February 2018 for Oceanic. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Oceanic estimates sales returns at the end of each month.

Feb. 3 Purchased merchandise inventory on account from Silton Wholesalers, \(5,200. Terms 2/15, n/EOM, FOB shipping point.

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

4 Purchased merchandise inventory for cash of \(1,500.

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

8 Sold merchandise inventory to Herenda Company, \(5,600, on account. Terms 3/15, n/35. Cost of goods, \)2,352.

9 Purchased merchandise inventory on account from Teddy Wholesalers, \(7,000. Terms 1/10, n/30, FOB destination.

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

12 Received payment from Herenda Company, less discount.

13 After negotiations, received a \)500 allowance from Teddy Wholesalers.

15 Sold merchandise inventory to Jordon Company, \(3,400, on account. Terms n/EOM. Cost of goods, \)1,496.

22 Made payment, less allowance, to Teddy Wholesalers for goods purchased on February 9.

23 Jordon Company returned \(1,000 of the merchandise sold on February 15. Cost of goods, \)440.

25 Sold merchandise inventory to Smith for \(1,700 on account that cost \)663. Terms of 2/10, n/30 were offered, FOB shipping point. As a courtesy to Smith, $70 of freight was added to the invoice for which cash was paid by Oceanic.

27 Received payment from Smith, less discount.

28 Received payment from Jordon Company, less return.

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.

D & T Printing Supplies’ accounting records include the following accounts at December 31, 2018.

Purchases \( 185,200 Accumulated Depreciation—Building \) 21,000

Accounts Payable 7,700 Cash 18,100

Rent Expense 8,600 Sales Revenue 257,800

Building 42,800 Depreciation Expense—Building 4,700

Common Stock 55,000 Dividends 26,500

Retained Earnings 30,400 Interest Expense 1,900

Merchandise Inventory,

Beginning 119,000 Merchandise Inventory,

Ending 102,100

Notes Payable 11,300 Purchase Returns and Allowances 20,700

Purchase Discounts 2,900

Requirements

1. Journalize the required closing entries for D & T Printing Supplies assuming that D & T uses the periodic inventory system.

2. Determine the ending balance in the Retained Earnings account.

When recording purchase returns and purchase allowances under the periodic inventory system, what account is used?

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

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