Question

Prepare journal entries to record each of the following PURCHASES transactions for Pink Pagoda Co. Please include the date of the entry in your answer and indent any credits.

1. April 17- Pink Pagoda purchases 500 units of product at a price of $15 per unit on an invoice dated April 17. Terms of the purchase are 2%/10, n/60.

2. April 20- Pink Pagoda returns merchandise from the April 17purchase and receives a credit for $500 to their account.

3. April 27- Pink Pagoda pays the balance due from the April 17 purchase less the return on April 20.

Prepare journal entries to record each of the following SALES transactions by Black Hat LLC. Include the date of the entry and indent any credits.

1. May 1 Black Hat sells merchandise for $5,000 with terms of 2%/10,net/60. The cost of the merchandise is $2,000.

2. May 3 The customer in the May 1 sale returns merchandise to Black Hat and receives credit for $500. The merchandise which had cost $200, was returned to Black Hat's inventory.

3. May 10 Black hat receives payment for the amount due from the May 1 sale less the return of May 3.

Answer 1

1)
Assuming company uses perpetual inventory system.
Date	General Journal	Debit	Credit
17-Apr	Merchandise Inventory	7500
	Accounts Payable		7500
	(Purchased merchandise inventory)
20-Apr	Accounts Payable	500
	Merchandise Inventory		500
	(Returned merchandise inventory)
27-Apr	Accounts Payable ( 7500 - 500 )	7000
	Discount Received ( 7000 * 2%)		140
	Cash		6860
	(Paid Cash on accounts payable)
2)
Assuming company uses perpetual inventory system.
Date	General Journal	Debit	Credit
1-May	Accounts Receivable	5000
	Sales		5000
	(Sales made on account)
	Cost of Goods sold	2000
	Merchandise Inventory		2000
	(To record the cost of goods sold)
3-May	Sales Return & Allowances	500
	Accounts Receivable		500
	(To record sales return)
	Merchandise Inventory	200
	Cost of goods sold		200
	(To restore cost of goods sold)
10-May	Cash	4410
	Sales discount ( 4500 x 2%)	90
	Accounts Receivable ( 5000 - 500)		4500
	(To record receipt of cash on account)