Question

Given the Abdulla Company’s Trial Balance of April 30, 2020, a) record the following transactions. b) What is the effect of the following transactions to the merchandise inventory account and the sales?

	Debit	Credit
Cash	130,000
Merchandise Inventory	20,000
Capital		100,000
Sales		50,000

May 14 The Company sold merchandise to Majid Company AED 90,000 terms 2/10 net 60.

The merchandise had a cost of AED 40,000.

May 15   The Company purchased merchandise from Saif Company 80,000 with terms 2/10 net 30.

Made a down payment of 20,000.

May 20 Collected 90% of the account receivable from Majid Company.

May 21 Collected 10% of the account receivable from Majid Company.

May 24   The Company paid the balance owed to Saif Company entry May 15.

Answer:

a) record the transactions.

b) What is the effect of the following transactions to the merchandise inventory account and the sales?

Answer 1

14 may	Accounts Receivable	90000
	To Sales revenue		90000
	(Sales made on account)
14 may	Cost of goods sold	40000
	To Merchandise Inventory		40000
	(Cost of goods sold)
15 may	Merchandise Inventory	80000
	To Accounts payable		60000
	To cash		20000
	record the purchase of inventory on account and cash
20 may	Cash	79380
	Sales discount	1620
	To accounts receivable		81000
	(cash received )
21 may	cash	8820
	sales discount	180
	To accounts receivable		9000
24 may	Accounts payable	60000
	To cash		60000
	(cash paid )

merchandise inventory account
To opening balance	20000	By Cost of goods sold	40000
To accounts payable	60000	By balance	60000
To cash	20000

sales
balance	140000	By sales	50000
		accounts receivable	90000

cash account
To balance	130000	by merchandise inventory	20000
To account receivable	79380	by accounts payable	60000
To account receivable	8820	by balance	138200

Trial balnce	debit	credit
cash	138200
inve	60000
sales discount	1800
capital		100000
sales		140000
cost of goods sold	40000
total	240000	240000

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