Question

The following were selected from among the transactions completed by Babcock Company during November of the current year. Babcock uses the net method under a perpetual inventory system.

Nov.	3	Purchased merchandise on account from Moonlight Co., list price $89,000, trade discount 30%, terms FOB destination, 2/10, n/30.
	4	Sold merchandise for cash, $38,210. The cost of the goods sold was $20,810.
	5	Purchased merchandise on account from Papoose Creek Co., $51,550, terms FOB shipping point, 2/10, n/30, with prepaid freight of $730 added to the invoice.
	6	Returned $14,000 ($20,000 list price less trade discount of 30%) of merchandise purchased on November 3 from Moonlight Co.
	8	Sold merchandise on account to Quinn Co., $15,010 with terms n/15. The cost of the goods sold was $10,190.
	13	Paid Moonlight Co. on account for purchase of November 3, less return of November 6.
	14	Sold merchandise on VISA, $231,570. The cost of the goods sold was $142,060.
	15	Paid Papoose Creek Co. on account for purchase of November 5.
	23	Received cash on account from sale of November 8 to Quinn Co.
	24	Sold merchandise on account to Rabel Co., $54,800, terms 1/10, n/30. The cost of the goods sold was $33,850.
	28	Paid VISA service fee of $3,580.
	30	Paid Quinn Co. a cash refund of $6,420 for returned merchandise from sale of November 8. The cost of the returned merchandise was $3,140.

Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS
Babcock Company
General Ledger
ASSETS 110 Cash 121 Accounts Receivable-Quinn Co. 122 Accounts Receivable-Rabel Co. 125 Notes Receivable 130 Inventory 131 Estimated Returns Inventory 140 Office Supplies 141 Store Supplies 142 Prepaid Insurance 180 Land 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 211 Accounts Payable-Moonlight Co. 212 Accounts Payable-Papoose Creek Co. 216 Salaries Payable 218 Sales Tax Payable 219 Customer Refunds Payable 221 Notes Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Goods Sold 521 Delivery Expense 522 Advertising Expense 524 Depreciation Expense-Store Equipment 525 Depreciation Expense-Office Equipment 526 Salaries Expense 531 Rent Expense 533 Insurance Expense 534 Store Supplies Expense 535 Office Supplies Expense 536 Credit Card Expense 539 Miscellaneous Expense 710 Interest Expense

Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
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10
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12
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Answer 1

Net Method - Perpetual Inventory System-

Journal Entries with Accounting Equation
	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	=	LIABILITIES	+	EQUITY
	Nov. 3	Inventory (100% - 30% = 70%*$89,000)		$62,300		$62,300
		Accounts Payable - Moonlight Co.			$62,300			$62,300
		(To record the purchase of inventory on account)
	Nov. 4	Cash		$38,210		$38,210
		Sales			$38,210					$38,210
		(To record the sales made by cash)
		Cost of goods sold		$20,810						($20,810)
		Inventory			$20,810	($20,810)
		(To record the cost of goods sold)
	Nov. 5	Inventory		$51,550		$51,550
		Accounts Payable - Papoose Creek Co.			$51,550			$51,550
		(To record the purchase of inventory on account)
	Nov. 6	Accounts Payable - Moonlight Co.		$14,000				($14,000)
		Inventory			$14,000	($14,000)
		(To record the merchandise returned)
	Nov. 8	Accounts Receivable - Quinn Co.		$15,010		$15,010
		Sales			$15,010					$15,010
		(To record the sales made on account)
		Cost of goods sold		$10,190						($10,190)
		Inventory			$10,190	($10,190)
		(To record the cost of goods sold)
	Nov. 13	Accounts Payable - Moonlight Co. ($62,300 - $14,000)		$48,300				($48,800)
		Inventory ($48,300*2/100)			$966	($966)
		Cash ($48,300 - $966)			$47,334	($47,334)
		(To record the payment of accounts payable withing discount period)
	Nov. 14	Cash		$231,570		$231,570
		Sales			$231,570					$231,570
		(To record the sales made by cash)
		Cost of goods sold		$142,060						($142,060)
		Inventory			$142,060	($142,060)
		(To record the cost of goods sold)
	Nov. 15	Accounts Payable - Papoose Creek Co.		$51,550				($51,550)
		Inventory ($51,550 - $730 = $50,820*2/100)			$1,016	($1,016)
		Cash ($51,550 - $1,016)			$50,534	($50,534)
		(To record the payment of accounts payable withing discount period)
	Nov. 23	Cash		$15,010		$15,010
		Accounts Receivable - Quinn Co.			$15,010	($15,010)
		(To record the collection of accounts receivable)
	Nov. 24	Accounts Receivable - Rebel Co.		$54,800		$54,800
		Sales			$54,800					$54,800
		(To record the sales made on account)
		Cost of goods sold		$33,850						($33,850)
		Inventory			$33,850	($33,850)
		(To record the cost of goods sold)
	Nov. 28	Credit Card Expenses		$3,580						($3,580)
		Cash			$3,580	($3,580)
		(To record the payment of credit card expenses)
	Nov. 30	Sales		$6,420						($6,420)
		Cash			$6,420	($6,420)
		(To record the sales returns)
		Inventory		$3,140		$3,140
		Cost of Goods Sold			$3,140					$3,140
		(To record the cost of inventory returned)