Question

A company had the following related transactions:

Purchased merchandise on account from Blitzen Co., list price $20,000, trade discount 25%, terms FOB shipping point, 2/10, n/30, with prepaid transportation costs of $650 added to the invoice.

Purchased merchandise on account from Cupid Co., $8,000, terms FOB destination, 1/10, n/30.

Sold merchandise on account to Donner Co., $9,800, terms 2/10, n/30. The cost of the merchandise sold was $5,800.

Returned $2,000 of merchandise purchased from Cupid Co.

Paid Blitzen Co in full within credit term.

Received merchandise returned by Donner Co. from sale, $1,800. The cost of the merchandise returned was $1,080.

Paid Cupid Co in full within credit term.

Received cash on account from Donner Co.

Perpetual inventory records indicate that $85,000 of merchandise should be on hand. The physical inventory indicates that $81,350 of merchandise is on hand.

Required:

Prepare the general journal entries to record these transactions using a perpetual inventory system.

Answer 1

S.N.	General Journal	Debit	Credit
1	Merchandise Inventory	15650
	Accounts Payable (Blitzen)		15650
	(20,000 * 25%) = $5,000 discount
	(20,000 – 5,000 + 650 shipping)
2	Merchandise Inventory	8000
	Accounts Payable (Cupid)		8000
3	Accounts Receivable (Donner)	9800
	Sales		9800
	Cost of Merchandise Sold	5800
	Merchandise Inventory		5800
4	Accounts Payable (Cupid)	2000
	Merchandise Inventory		2000
5	Accounts Payable (Blitzen)	15650
	Cash		15350
	Merchandise Inventory		300
	(15,000 * 2% = $300 discount)
6	Sales Return & allowances	1800
	Accounts Receivable (Donner)		1800
	Merchandise Inventory	1080
	Cost of Merchandise sold		1080
7	Accounts Payable (Cupid)	6000
	cash		5940
	Merchandise Inventory		60
	(8,000 – 2,000 return = 6,000 bal.)
	(6,000 * 1% = $60 discount)
8	Cash	7840
	Sales Discount	160
	Accounts Receivable (Donner)		8000
	(8,000 * 2% = $160 discount)
	(9,800 – 1,800 return = 8,000 bal.)
9	Cost of Merchandise sold	3650
	Merchandise Inventory		3650
	(85,000 – 81,350 = 3,650)