Question

On May 11, 2020, Wilson Purchasing purchased $26,500 of merchandise from Happy Sales; terms 3/10, n/90, FOB Happy Sales. The cost of the goods to Happy was $21,500. Wilson paid $1,650 to Express Shipping Service for the delivery charges on the merchandise on May 11. On May 12, Wilson returned $4,300 of goods to Happy Sales, which restored them to inventory. The returned goods had cost Happy $3,500. On May 20, Wilson mailed a cheque to Happy for the amount owed on that date. Happy received and recorded the cheque on May 21.

Required:

a. Present the journal entries that Wilson Purchasing should record for these transactions. Assume that Wilson uses a perpetual inventory system.

b. Present the journal entries that Happy Sales should record for these transactions. Assume that Happy uses a perpetual inventory system.

Answer 1

Requirement:A

Date	Account Titles and Explanation	Debit	Credit
May.11	Inventory	$ 26,500
	Account Payable		$ 26,500
	(To record inventory purchased on account)
May.11	Inventory	$    1,650
	Cash		$    1,650
	(To record freight charges paid)
May.12	Account Payable	$    4,300
	Inventory		$    4,300
	(To record inventory returned and received credit)
May.20	Account Payable	$ 22,200
	Inventory ( 22200*3/100 )		$        666
	Cash		$ 21,534
	( To record account payable paid)

Requirement:B

Date	Account Titles and Explanation	Debit	Credit
May. 11	Account Receivable	$ 26,500
	Sales Revenue		$ 26,500
	(To record sales made on account)
May. 11	Cost Of Goods Sold	$ 21,500
	Inventory		$ 21,500
	( To record Cost of goods sold)
May. 12	Sales return and allowance	$    4,300
	Account Receivable		$    4,300
	(To record sales returns)
May. 12	Inventory	$    3,500
	Cost Of Goods Sold		$    3,500
	( To record Cost of goods sold)
May. 20	Cash	$ 21,534
	Sales Discount [22200*3%]	$        666
	Account Receivable		$ 22,200
	(To record account receivable received)