Question

In: Accounting

The following transactions were recorded by an inexperienced bookkeeper during the months of June and July...

The following transactions were recorded by an inexperienced bookkeeper during the months of June and July for Pharoah Company. Pharoah Company uses a perpetual inventory system.

June 10
A purchase of $4,000 of merchandise from DanDan Distributors was debited to Purchases and credited to Cash. The terms of the purchase were 2/10, n/30, FOB shipping point.
11
The invoice for freight in the amount of $185 for the delivery of merchandise purchased from DanDan was paid and was debited to Delivery Expense.
12
Damaged goods totalling $100 were returned to DanDan Distributors for credit. The bookkeeper recorded a debit to Accounts Receivable and a credit to Sales Returns and Allowances.
20
A payment was made to DanDan Distributors for the June 10 purchase. The payment was recorded as a debit to Purchases and a credit to Cash.
July 15
Pharoah sold goods for $9,285, Sales was credited and Cost of Goods Sold was debited for this amount. The cost of the inventory sold was $3,600. The terms of the sale were 1/15, n/30, FOB destination.
15
Freight charges on the above transaction were debited to Accounts Receivable and credited to Cash for $155. The bookkeeper believed the customer had to pay for the freight charges.
17
Pharoah’s manager gave the customer from July 15 a $380 allowance. The entry made to record the allowance was a debit to Sales and a credit to Sales Returns and Allowances.

Review each transaction below and indicate whether you agree or disagree with how the bookkeeper accounted for the transaction.

June 10
A purchase of $4,000 of merchandise from DanDan Distributors was debited to Purchases and credited to Cash. The terms of the purchase were 2/10, n/30, FOB shipping point.

Agree
Disagree
11
The invoice for freight in the amount of $185 for the delivery of merchandise purchased from DanDan was paid and was debited to Delivery Expense.

Agree
Disagree
12
Damaged goods totalling $100 were returned to DanDan Distributors for credit. The bookkeeper recorded a debit to Accounts Receivable and a credit to Sales Returns and Allowances.

Agree
Disagree
20
A payment was made to DanDan Distributors for the June 10 purchase. The payment was recorded as a debit to Purchases and a credit to Cash.

Agree
Disagree
July 15
Pharoah sold goods for $9,285, Sales was credited and Cost of Goods Sold was debited for this amount. The cost of the inventory sold was $3,600. The terms of the sale were 1/15, n/30, FOB destination.

Agree
Disagree
15
Freight charges on the above transaction were debited to Accounts Receivable and credited to Cash for $155. The bookkeeper believed the customer had to pay for the freight charges.

Agree
Disagree
17
Pharoah’s manager gave the customer from July 15 a $380 allowance. The entry made to record the allowance was a debit to Sales and a credit to Sales Returns and Allowances.

Agree
Disagree

SHOW LIST OF ACCOUNTS
LINK TO TEXT
LINK TO TEXT

If you disagreed with any of the accounting, prepare the correct entry

Solutions

Expert Solution

Solution:

June 10: Disagree

Corrected Journal Entries
Particulars Debit Credit
Inventory Dr $4,000.00
     To Accounts Payable $4,000.00

June 11:Disagree

Corrected Journal Entries
Particulars Debit Credit
Inventory Dr $185.00
     To Cash $185.00

June 12: Disagree

Corrected Journal Entries
Particulars Debit Credit
Accounts Payable Dr $100.00
     To Inventory $100.00

June 20: Disagree

Corrected Journal Entries
Particulars Debit Credit
Accounts Payable Dr $3,900.00
     To Cash $3,822.00
     To Inventory $78.00

July 15: Disagree

Corrected Journal Entries
Particulars Debit Credit
Accounts receivables Dr $9,285.00
     To Sales revenue $9,285.00
Cost of goods sold Dr $3,600.00
     To Inventory $3,600.00

July 15: Disagree

Corrected Journal Entries
Particulars Debit Credit
Freight outward Dr $155.00
     To Cash $155.00

July 17: Disagree

Corrected Journal Entries
Particulars Debit Credit
Sales returns and allowances Dr $380.00
     To Accounts receivables $380.00

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