Question

ACC1111- homework
Read chapters 6 and 7. Answer the illustrative problem on page 316, only answer part 1 and omit the entry for May 25th.

Illustrative problem page 316

The following transactions were completed by Montrose Company during May of the current year. Montrose Company uses a perpetual inventory system.
May   
3.Purchased merchandise on account from Floyd Co., $4,000, terms FOB shipping point, 2/10, n/30, with prepaid freight of $120 added to the invoice.

4. Purchased merchandise on account from Kramer Co., $8,500, terms FOB destination, 1/10, n/30.

5. Sold merchandise on account to C. F. Howell Co., list price $4,000, trade discount 30%, terms 2/10, n/30. The cost of the merchandise sold was $1,125.    

8. Purchased office supplies for cash, $150.

10. Returned merchandise purchased on May 5 from Kramer Co., $1,300.

13. Paid Floyd Co. on accouthe nt for purchase of May 3.

14. Purchased merchandise for cash, $10,500.

15. Paid Kramer Co. on accouthe for purchase of May 5, less return of May 10.

16. Received cash on account from sale of May 6 to C. F. Howell Co.

19. Sold merchandise on MasterCard credit cards, $2,450. The cost merchandisen- dise sold was $980.

22. Sold merchandise for cash to Comer Co., $3,480. The cost of the merchandise sold was $1,400.

24. Sold merchandise on account to Smith Co., $4,350, terms n/30. The cost of the merchandise sold was $1,750.

25. Refunded Comer Co. $1,480 for returned merchandise from sale on May 22. The cost of the returned merchandise was $600.

31. Paid a service processing fee of $140 for MasterCard sales.

Instructions

1. Journalize the preceding transactions.

2. Journalize the adjusting entry for merchandise inventory shrinkage, $3,750.

3. Journalize the adjusting entries for estimated customer refunds and returns. Assume that sales of $3,000 are estimated to be refunded and inventory costing $1,800 is estimated to be returned.

Answer 1

Requirement 1:

Date	Account title and explanation	Debit	Credit
May 3	Inventory [4000+120]	$4,120
	Accounts payable-Floyed Co		$4,120
	[To record purchase of inventory on account]
4	Inventory	$8,500
	Accounts payable-Kramer Co		$8,500
	[To record purchase of inventory on account]
5	Accounts receivable-C.F.Howell Co.	$2,800
	Sales revenue [4000 x 70%]		$2,800
	[To record credit sales]
	Cost of goods sold	$1,125
	Inventory		$1,125
	[To record cost of goods sold]
8	Office supplies	$150
	Cash		$150
	[To record purchase of supplies for cash]
10	Accounts payable-Kramer Co	$1,300
	Inventory		$1,300
	[To record purchase returns]
13	Accounts payable-Floyed Co	$4,120
	Inventory [4,000 x 2%]		$82
	Cash		$4,038
	[To record cash paid to supplier]
14	Inventory	$10,500
	Cash		$10,500
	[To record purchase of inventory for cash]
15	Accounts payable-Kramer Co [8,500-1300]	$7,200
	Cash		$7,200
	[To record cash paid to suppliers]
16	Cash	$2,240
	Sales discount [2,800 x 2%]	$560
	Accounts receivable-C.F. Howell Co.		$2,800
	[To record collections from customers]
19	Cash	$2,450
	Sales revenue		$2,450
	[To record credit card sales]
	Cost of goods sold	$980
	Inventory		$980
	[To record cost of goods sold]
22	Cash	$3,480
	Sales revenue		$3,480
	[To record cash sales]
	Cost of goods sold	$1,400
	Inventory		$1,400
	[To record cost of goods sold]
24	Accounts receivable-Smith Co.	$4,350
	Sales revenue		$4,350
	[To record credit sales]
	Cost of goods sold	$1,750
	Inventory		$1,750
	[To record cost of goods sold]
25	Sales returns and allowance	$1,480
	Accounts receivable-Smith Co.		$1,480
	[To record sales returns]
	Inventory	$600
	Cost of goods sold		$600
	[To record cost of sales returns]
31	Card fee expense	$140
	Cash		$140
	[To record payment of card fee expense]

Requirement 2:

Date	Account title and explanation	Debit	Credit
Dec 31	Cost of goods sold	$3,750
	inventory		$3,750
	[To record inventory shrinkage]

Requirement 3:

Date	Account title and explanation	Debit	Credit
Dec 31	Sales revenue	$3,000
	Refunds payable		$3,000
	[To record estimated refunds for the year]
	Estimated returns inventory	$1,800
	Cost of goods sold		$1,800
	[To record cost of estimated returns for the year]