Question

Prepare the journal entries to record the following transactions on Cullumber Company's books using a perpetual inventory system. (If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) 

(a) On March 2, Cullumber Company sold $914,000 of merchandise to Marin Company on account, terms 3/10, n/30. The cost of the merchandise sold was $592,400. 

(b) On March 6, Marin Company returned $104,600 of the merchandise purchased on March 2. The cost of the merchandise returned was $64,400. 

(c) On March 12, Cullumber Company received the balance due from Marin Company. 

Answer 1

The terms 3/10, n/30 means the following:

• 3/10 means: '3' indicates the discount percentage and '10' indicates the number of days from the date of invoice (March 2) within which buyer or Customer has to pay the amount owed to the seller or supplier to avail (or to qualify for) the discount of 3%.

• N/30 states that if the buyer or customer is not able to pay the invoice amount within 10 days to avail 3% discount, then the entire invoice amount is due within 30 days from the date of the invoice.

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No,	Date	Account Titles and Explanation	Debit	Credit
(a)	March 2	Accounts Receivable	$914,000
		Sales Revenue		$914,000
		(To record the sale of merchandise)
	March 2	Cost of Goods Sold	$592,400
		Inventory		$592,400
(b)	March 6	Sales returns and Allowances	$104,600
		Accounts Receivable		$104,600
		(To record the return of merchandise)
	March 6	Inventory	$64,400
		Cost of Goods Sold		$64,400
(c)	March 12	Cash                                  [Amount receivable - Sales discount = $809,400 - $24,282]	$785,118
		Sales discount                   [Amount receivable x 3% = (Total sales - Sales returns) x 3% = ($914,000 - $104,600) x 3%]	$24,282
		Accounts Receivable   [Total sales - Sales returns = $914,000 - $104,600]		$809,400