Question

Problem 5-1A Preparing journal entries for merchandising activities-perpetual system LO P1, P2

Prepare journal entries to record the following merchandising transactions of Cabela’s, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Boden.)

July		1		Purchased merchandise from Boden Company for $6,500 under credit terms of 2/15, n/30, FOB shipping point, invoice dated July 1.
		2		Sold merchandise to Creek Co. for $1,000 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $542.
		3		Paid $105 cash for freight charges on the purchase of July 1.
		8		Sold merchandise that had cost $1,800 for $2,200 cash.
		9		Purchased merchandise from Leight Co. for $2,600 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9.
		11		Received a $600 credit memorandum from Leight Co. for the return of part of the merchandise purchased on July 9.
		12		Received the balance due from Creek Co. for the invoice dated July 2, net of the discount.
		16		Paid the balance due to Boden Company within the discount period.
		19		Sold merchandise that cost $1,000 to Art Co. for $1,500 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19.
		21		Issued a $250 credit memorandum to Art Co. for an allowance on goods sold on July 19.
		24		Paid Leight Co. the balance due, net of discount.
		30		Received the balance due from Art Co. for the invoice dated July 19, net of discount.
		31		Sold merchandise that cost $5,300 to Creek Co. for $7,100 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.

  

Answer 1

Date	Account Titles and Explanation	Debit	Credit
Jul-01	Merchandise Inventory	$ 6,500
	Accounts Payable-Boden		$ 6,500
	(To record the purchases on account from Boden company)
Jul-02	Accounts Receivable-Creek Co.	$ 1,000
	Sales		$ 1,000
	(To record the sales on account to Creek Co.)
	Cost of Goods Sold	$     542
	Merchandise Inventory		$     542
	(to record the cost of goods sold to Creek Co.)
Jul-03	Merchandise Inventory	$     105
	Cash		$     105
	(To record the freight charges)
Jul-08	Cash	$ 2,200
	Sales		$ 2,200
	(To record the cash sales)
Jul-08	Cost of Goods Sold	$ 1,800
	Merchandise Inventory		$ 1,800
	(To record the cost of goods sold)
Jul-09	Merchandise Inventory	$ 2,600
	Accounts Payable-Leight Co.		$ 2,600
	(To record the purchases on account from Leight Co.)
Jul-11	Accounts Payable: Leight Co.	$     600
	Merchandise Inventory		$     600
	(To record the purchase returns)
Jul-12	Cash ($1,000*98%)	$     980
	Sales Discounts ($1,000*2%)	$       20
	Accounts Receivable- Creek Co.		$ 1,000
	(To record the payment received from Creek Co.)
Jul-16	Accounts Payable-Boden Company	$ 6,500
	Merchandise Inventory ($6,500*2%)		$     130
	Cash ($6,500*98%)		$ 6,370
	(To record the payment made to Boden company.)
Jul-19	Accounts Receivable- Art Co.	$ 1,500
	Sales		$ 1,500
	(To record the sales on account Art Co.)
Jul-19	Cost of Goods Sold	$ 1,000
	Merchandise Inventory		$ 1,000
	(to record the cost of goods sold to Art Co.)
Jul-21	Sales Returns and Allowances	$     250
	Accounts Receivable- Art Co.		$     250
	(To record the sales return and allowances)
Jul-24	Accounts Payable- Leight Co. ($2,600-$600)	$ 2,000
	Merchandise Inventory ($2,000*2%)		$       40
	Cash ($2,000*98%)		$ 1,960
	(To record the payment made to Leight Co.)
Jul-30	Cash ($1,250*98%)	$ 1,225
	Sales Discounts ($1,250*2%)	$       25
	Accounts Receivable- Art Co. ($1,500-$250)		$ 1,250
	(To record the payment received from Art Co.)
Jul-31	Accounts Receivable- Creek Co.	$ 7,100
	Sales		$ 7,100
	(To record the sales on account Creek Co.)
Jul-31	Cost of Goods Sold	$ 5,300
	Merchandise Inventory		$ 5,300
	(to record the cost of goods sold to Creek Co.)