Question

P5-2A
Phantom Book Warehouse Ltd. distributes hardcover books to retail stores. At the end of May, Phantom's inventory consists of 250 books purchased at $18 each. Phantom uses a perpetual inventory system.

During the month of June, the following merchandise transactions occurred:

June  1	Purchased 180 books on account for $16 each from Reader's World Publishers, terms n/45.
3	Sold 220 books on account to The Book Nook for $25 each, with an average cost of $17, terms 2/10, n/45.
5	Received a $160 credit for 10 books returned to Reader's World Publishers.
8	Sold 80 books on account to Read-A-Lot Bookstore for $22 each, with an average cost of $17, terms 2/10, n/45.
9	Issued a $264 credit memorandum to Read-A-Lot Bookstore for the return of 12 damaged books. The books were determined to be no longer saleable and were destroyed.
11	Purchased 130 books on account for $15 each from Read More Publishers, terms n/45.
12	Received payment in full from The Book Nook.
17	Received payment in full from Read-A-Lot Bookstore.
22	Sold 125 books on account to Reader's Bookstore for $25 each, with an average cost of $17, terms 2/10, n/45.
25	Granted Reader's Bookstore a $375 credit for 15 returned books. These books were restored to inventory.
29	Paid Reader's World Publishers in full.

(b) Record the June transactions

(c) Create a T account for the Inventory account. Enter the opening balance, post the June transactions related to Inventory prepared in part (b), and determine the ending balance in the account.

Answer 1

(b)

Phantom Book Warehouse Ltd.
Journal entries for the month of June
Date	Account title	Debit	Credit
6/1	Inventory	2880.00
	Accounts payable		2880.00
	(Purchase of books on account from Readers World Publishers)
6/3	Accounts Receivable	5500.00
	Sales		5500.00
	(Sale of 220 books @$25 each to The Book)
	Cost of goods sold	3740.00
	Inventory		3740.00
	(Cost of the books sold to The Book Nook)
6/5	Accounts payable	160.00
	Inventory		160.00
	(Credit received from Readers World for returned books)
6/8	Accounts Receivable	1760.00
	Sales		1760.00
	(Sale of 80 books @$22 each to Read-a-Lot Bookstore)
	Cost of goods sold	1360.00
	Inventory		1360.00
	(Cost of the books sold to Read-a-Lot Bookstore)
6/9	Sales	264.00
	Accounts Receivable		264.00
	(Credit memeo issued to Read-a-Lot Bookstore for 12 books returned)
6/11	Inventory	1950.00
	Accounts payable		1950.00
	(Purchase of books on account from Read More Publishers)
6/12	Cash	3665.20
	Sales discount	74.80
	Accounts Receivable		3740.00
	(Payment received from The Book Nook)
6/17	Cash	1466.08
	Sales discount	29.92
	Accounts Receivable		1496.00
	(Payment received from Read-a-Lot Book Store)
6/22	Accounts Receivable	3125.00
	Sales		3125.00
	(Sale of 125 books @$25 each to Reader's Bookstore)
	Cost of goods sold	2125.00
	Inventory		2125.00
	(Cost of books sold to Reader's Bookstore)
6/25	Sales	375.00
	Accounts Receivable		375.00
	(Credit memo issued for return of 15 books to Readers' Bokstore)
	Inventory	255.00
	Cost of goods sold		255.00
	(Cost of books returned by Readers' Bookstore)
6/29	Accounts payable	2720.00
	Cash		2720.00
	(Payment made to Readers World Publishers)

(c) Ending balance of in the account is $2,200.

Inventory
Date	Account	Debit	Date	Account	Credit
6/1	Beg.Bal.	4500.00	6/3	Cost of goods sold	3740.00
6/1	Accounts payable	2880.00	6/5	Accounts payable	160.00
6/11	Accounts payable	1950.00	6/8	Cost of goods sold	1360.00
6/25	Cost of goods sold	255.00	6/22	Cost of goods sold	2125.00
			6/30	Balance c/o	2200.00
		9585.00			9585.00
7/1	Balance b/d	2200.00