Question

Prepare journal entries to record the following merchandising transactions of Clark'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—Ryan.)

Jul. 1 Purchased merchandise from Ryan Company for $6,600 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1.

Jul. 2 Sold merchandise to Sanchez Co. for $1,200 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $720.

Jul. 3 Paid $245 cash for freight charges on the purchase of July 1.

Jul. 8 Sold merchandise that had cost $1,400 for $2,300 cash.

Jul. 9 Purchased merchandise from Perez Co. for $2,500 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9.

Jul. 11 Returned $500 of merchandise purchased on July 9 from Perez Co. and debited its account payable for that amount.

Jul. 12 Received the balance due from Sanchez Co. for the invoice dated July 2, net of the discount.

Jul. 16 Paid the balance due to Ryan Company within the discount period.

Jul. 19 Sold merchandise that cost $1,300 to Hall Co. for $1,800 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19.

Jul. 21 Gave a price reduction (allowance) of $400 to Hall Co. for merchandise sold on July 19 and credited Hall’s accounts receivable for that amount.

Jul. 24 Paid Perez Co. the balance due, net of discount. Jul. 30 Received the balance due from Hall Co. for the invoice dated July 19, net of discount.

Jul. 31 Sold merchandise that cost $4,600 to Sanchez Co. for $7,600 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.

Answer 1

Answer -

No.	Date	General Journal	Debit	Credit
1.	Jul. 01	Merchandise inventory	$6,600
		Accounts payable-Ryan Company		$6,600
2.	Jul. 02	Accounts receivable-Sanchez Co.	$1,200
		Sales		$1,200
3.	Jul. 02	Cost of goods sold	$720
		Merchandise inventory		$720
4.	Jul. 03	Merchandise inventory	$245
		Cash		$245
5.	Jul. 08	Cash	$2,300
		Sales		$2,300
6.	Jul. 08	Cost of goods sold	$1,400
		Merchandise inventory		$1,400
7.	Jul. 09	Merchandise inventory	$2,500
		Accounts payable-Perez Co.		$2,500
8.	Jul. 11	Accounts payable-Perez Co.	$500
		Merchandise inventory		$500
9.	Jul. 12	Cash	$1,176
		Sales discount	$24
		Accounts receivable-Sanchez Co.		$1,200
10.	Jul. 16	Accounts payable-Ryan Company	$6,600
		Merchandise inventory		$66
		Cash		$6,534
11.	Jul. 19	Accounts receivable-Hall Co.	$1,800
		Sales		$1,800
12.	Jul. 19	Cost of goods sold	$1,300
		Merchandise inventory		$1,300
13.	Jul. 21	Sales returns and allowances	$400
		Accounts receivable-Hall Co.		$400
14.	Jul. 24	Accounts payable-Perez Co.	$2,000
		Merchandise inventory		$40
		Cash		$1,960
15.	Jul. 30	Cash	$1,372
		Sales discount	$28
		Accounts receivable-Hall Co.		$1,400
16.	Jul. 31	Accounts receivable-Sanchez Co.	$7,600
		Sales		$7,600
17.	Jul. 31	Cost of goods sold	$4,600
		Merchandise inventory		$4,600

Calculation:

July 12:

Merchandise sold to Sanchez Co. for $1,200 under credit terms of 2/10, n/60 on Jul. 02

Here,

2 represent the sales discount in percentage

10 represent the discount period in days

n/60 represent the net due period in days i.e. 60 days

And Sanchez Co. paid due balance within discount period

So,

Sales discount = Accounts receivable-Sanchez Co. * Sales discount in percentage

= $1,200 * 2%

= $24

Cash = Accounts receivable-Sanchez Co. - Sales discount

= $1,200 - $24

= $1,176

July 16:

Merchandised purchased from Ryan Company for $6,600 under credit terms of 1/15, n/30 on Jul. 01

Here,

1 represent the purchase discount in percentage

15 represent the discount period in days

n/30 represent the net due period in days i.e. 30 days

And paid due balance within discount period to Ryan Company

So,

Merchandise inventory (Purchase discount) = Accounts payable-Ryan Company * purchase discount in percentage

= $6,600 * 1%

= $66

Cash = Accounts payable-Ryan Company - Merchandise inventory

= $6,600 - $66

= $6,534

July 24:

Merchandised purchased from Perez Co. for $2,500 under credit terms of 2/15, n/60 on Jul. 09

Here,

2 represent the purchase discount in percentage

15 represent the discount period in days

n/60 represent the net due period in days i.e. 60 days

And paid due balance within discount period to Perez Co.

So,

Accounts payable-Perez Co. = Merchandise purchased - Purchase return

= $2,500 - $500

= $2,000

Merchandise inventory (Purchase discount) = Accounts payable-Perez Company * purchase discount in percentage

= $2,000 * 2%

= $40

Cash = Accounts payable-Perez Company - Merchandise inventory

= $2,000 - $40

= $1,960

July 30:

Merchandise sold to Hall Co. for $1,800 under credit terms of 2/15, n/60 on Jul. 19

Here,

2 represent the sales discount in percentage

15 represent the discount period in days

n/60 represent the net due period in days i.e. 60 days

And Hall Co. paid due balance within discount period

So,

Accounts receivable-Hall Co. = Sales - Sales returns and allowances

= $1,800 - $400

= $1,400

Sales discount = Accounts receivable-Hall Co. * Sales discount in percentage

= $1,400 * 2%

= $28

Cash = Accounts receivable-Hall Co. - Sales discount

= $1,400 - $28

= $1,372