Question

Prepare journal entries to record the following merchandising transactions of Parker'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—Allen.)

Jul.		1		Purchased merchandise from Allen Company for $10,600 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1.
Jul.		2		Sold merchandise to Garcia Co. for $3,200 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $1,920.
Jul.		3		Paid $1,045 cash for freight charges on the purchase of July 1.
Jul.		8		Sold merchandise that had cost $3,800 for $6,300 cash.
Jul.		9		Purchased merchandise from Clark Co. for $4,500 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9.
Jul.		11		Returned $900 of merchandise purchased on July 9 from Clark Co. and debited its account payable for that amount.
Jul.		12		Received the balance due from Garcia Co. for the invoice dated July 2, net of the discount.
Jul.		16		Paid the balance due to Allen Company within the discount period.
Jul.		19		Sold merchandise that cost $4,100 to Perez Co. for $5,800 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19.
Jul.		21		Gave a price reduction (allowance) of $1,200 to Perez Co. for merchandise sold on July 19 and credited Perez’s accounts receivable for that amount.
Jul.		24		Paid Clark Co. the balance due, net of discount.
Jul.		30		Received the balance due from Perez Co. for the invoice dated July 19, net of discount.
Jul.		31		Sold merchandise that cost $7,000 to Garcia Co. for $11,600 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.

For each transaction, indicate the impact each item had on income and the dollar amount of the change in income, if any. Input decreases to net income as minus sign. Upon completion, compare the gross profit with the amount reported on the partial income statement.

Impact on income Increase (decrease) to income July 1) Purchased merchandise from Allen Company for $10,600 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1. No impact on income July 2) Sold merchandise to Garcia Co. for $3,200 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. Increases net income $3,200 July 2) The cost of the merchandise sold to Garcia Co. was $1,920. Decreases net income July 3) Paid $1,045 cash for freight charges on the purchase of July 1. No impact on income July 8) Sold merchandise for $6,300 cash. Increases net income July 8) The cost of the merchandise sold was $3,800. Decreases net income July 9) Purchased merchandise from Clark Co. for $4,500 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9. No impact on income July 11) Received a $900 credit memorandum from Clark Co. for the return of part of the merchandise purchased on July 9. No impact on income July 12) Received the balance due from Garcia Co. for the invoice dated July 2, net of the discount. Decreases net income July 16) Paid the balance due to Allen Company within the discount period. No impact on income July 19) Sold merchandise to Perez Co. for $5,800 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19. Increases net income July 19) The cost of the merchandise sold to Perez Co. was $4,100. Decreases net income July 21) Issued a $1,200 credit memorandum to Perez Co. for an allowance on goods sold on July 19. Decreases net income July 24) Paid Clark Co. the balance due, net of discount. No impact on income July 30) Received the balance due from Perez Co. for the invoice dated July 19, net of discount. Decreases net income July 31) Sold merchandise to Garcia Co. for $11,600 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31. Increases net income July 31) The cost of the merchandise sold to Garcia Co. was $7,000. Decreases net income Total gross profit $

Answer 1

In the books of Parker
Date	Particulars	Amount (Debit) in $	Amount (Credit)in $
Jul-01	Purchases	10600
	To Allen		10600
	Being Purchased merchandise from Allen Company
Jul-02	Garcia Co	3200
	To Sales		3200
	Being Sold merchandise to Garcia Co. for $3,200
Jul-03	Cash freight	1045
	To cash		1045
	Being Paid payment of freight charges made
Jul-08	Cash	6300
	To Sales		6300
	Being merchandise sold
Jul-09	Purchases	4500
	To Clark Co		4500
	Being Purchased merchandise from Clark Co.
Jul-11	Clark co	900
	To Purchase return		900
	Being $900 of merchandise purchased on July 9 from Clark Co returned
Jul-12	Cash	3136
	Discount allowed	64
	To Garcia Co		3200
	Being the balance due from Garcia Co. for the invoice dated July 2, net of the discount Received
Jul-16	Allen	10600
	To Cash		10494
	To discount received		106
	Being the balance due to Allen Company within the discount period Paid
Jul-19	Perez Co	5800
	To Sales		5800
	Being merchandise sold to Perez Co. for $5,800 under credit terms
Jul-21	Discount allowed	1200
	To Perez Co		1200
	Being a price reduction (allowance) given of $1,200 to Perez Co. for merchandise sold on July 19
Jul-24	Clark Co.	3600
	To Cash		3528
	To discount recd		72
	Being Clark Co. the balance due, net of discount paid
Jul-30	Cash	4508
	Discount allowed	92
	To Perez Co		4600
	Being Received the balance due from Perez Co. for the invoice dated July 19, net of discount.
Jul-31	Garcia Co	11600
	To Sales		11600
	Being Sold merchandise that cost to Garcia Co. for $11,600 under credit terms

Transaction	Impact on Income	Amount of impact
July 1) Purchased merchandise from Allen Company for $10,600 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1.	Decrease in income	-10,600
July 2) Sold merchandise to Garcia Co. for $3,200 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2.	Increases net income	3200
July 2) The cost of the merchandise sold to Garcia Co. was $1,920.	No impact on income	0
July 3) Paid $1,045 cash for freight charges on the purchase of July 1.	Decrease in income	-1045
July 8) Sold merchandise for $6,300 cash.	Increases net income	6300
July 8) The cost of the merchandise sold was $3,800.	No impact on income	0
July 9) Purchased merchandise from Clark Co. for $4,500 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9.	Decrease in income	-4500
July 11) Received a $900 credit memorandum from Clark Co. for the return of part of the merchandise purchased on July 9.	increase in income	900
July 12) Received the balance due from Garcia Co. for the invoice dated July 2, net of the discount.	Decreases net income	-64
July 16) Paid the balance due to Allen Company within the discount period.	Increases net income	106
July 19) Sold merchandise to Perez Co. for $5,800 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19.	Increases net income	5800
July 19) The cost of the merchandise sold to Perez Co. was $4,100.	No impact on income	0
July 21) Issued a $1,200 credit memorandum to Perez Co. for an allowance on goods sold on July 19.	Decreases net income	-1200
July 24) Paid Clark Co. the balance due, net of discount.	Increases net income	72
July 30) Received the balance due from Perez Co. for the invoice dated July 19, net of discount.	Decreases net income	-92
July 31) Sold merchandise to Garcia Co. for $11,600 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.	Increases net income	11600
July 31) The cost of the merchandise sold to Garcia Co. was $7,000.	No impact on income	0