Question

Molly’s Greenhouse supplies bedding plants and other gardening products to a variety of stores across Alberta and also has a local greenhouse open to the public. Molly’s uses a perpetual inventory system and the earnings approach for revenue recognition. Transactions for the business are shown below:

May	2		Purchased 500 decorative hanging baskets from Planters R Us, on account, at a cost of $26 each, terms 5/10, n/30. FOB shipping point.
	3		The correct company paid cash for the $175 shipping charges.
	4		Sold 200 hanging baskets to a hardware store in the city, on account, for a total invoice price of $8,000. Terms are 1/10, n/30 and the cost was $26 per basket. Molly’s paid the shipping charge of $75 on the same day.
	5		Received a credit from Planters R Us for the return of 60 hanging baskets that had defective hangers.
	7		20 of the baskets from the sale of May 4 were returned to the greenhouse for a full refund because the customer did not have enough room to store them.
	12		Made a payment on account for the balance owing to Planters R Us for the purchase of May 2.
	13		Received a cheque for the appropriate amount from the hardware store for the sale of May 4.

Prepare journal entries to record the above transactions using the perpetual method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit

	(To record sales on account.)
	(To record cost of goods sold.)
	(To record cash payment for freight.)

	(To record credit for sales return.)
	(To record cost of goods returned.)

May 13

Prepare journal entries to record the above transactions using the periodic method. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit

	(To record sales on account.)
	(To record cash payment for freight.)

May 13

Answer 1

1. Journal Entries (Perpetual Method) -

2. Journal Entries (Periodic Method) -

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