Question

Prepare all necessary journal entries for the following transactions for the Hot Rod Shop inc., who uses a perpetual inventory system for inventory.

1) On March 1st The Hot Rod Shop Inc., purchased 20 set of brakes at $50 each from stop-n-go distributors with terms 2/10, n/30.

2) On March 2nd The Hot Rod Shop Inc, paid $100 for freight on the delivery from stop-n-go distributors

3) On March 5th The Hot Rod Shop Inc, returned 2 defective sets of brakes which were purchased on March 1st from stop-n-go distributors.

4) On March 7th The Hot Rod Shop Inc, sold 8 sets of brakes to Wheels & More, Ltd. for $80 each with terms 1/10, n/30. These brakes acquired on March 1st.

5) On March 9th The Hot Rod Shop Inc, paid stop-n-go distributors the balance due

6) On March 11th The Hot Rod Shop Inc, granted a $20 allowance to Wheels & More, Ltd. as some of the sets of brakes did not meet expectations.

7) On March 14th, The Hot Rod Shop Inc, received the balance due from Wheels & More Ltd.

Answer 1

Record the following journal entries for the transactions

Date	Account Title and Explanation	Debit	Credit
Mar. 1	Merchandise Inventory (20 sets × $50) × (1−2%)	$980
	Accounts Payable		$980
	To record merchandise purchased on account
Mar. 2	Merchandise Inventory	$100
	Cash		$100
	To record freight paid on delivery
Mar. 5	Accounts Payable (2 sets × $50) × (1−2%)	$98
	Merchandise Inventory		$98
	To record 2 defective sets returned
Mar. 7	Accounts Receivable (8 sets × $80) × (1−1%)	$634
	Sales Revenue		$634
	To record sales revenue
	Cost of goods sold (980 + 100 − 98) × 8 ÷ 18	$436
	Merchandise Inventory		$436
	To record cost of goods sold
Mar. 9	Accounts Payable ($980 − 98)	$882
	Cash		$882
	To record cash paid on account
Mar. 11	Sales returns and allowances	$20
	Accounts Receivable		$20
	To record allowance grated to customer
Mar. 14	Cash ($634 − $20)	$614
	Accounts Receivable		$614
	To record cash collected on account