Question

In its ongoing efforts to make the student life easier, Large Mart is currently attempting to develop a “study pillow” which will allow students to upload study material into their brain whilst sleeping. However, Large Mart has recently discovered that an American company called Bpple already holds a patent for this type of device. As a result, Large Mart has given up on its development attempts and decided to sell the Bpple product, which is called iSLEEP.

After the new store is completed, Large Mart orders 30 iSLEEPs from Bpple for a price of $500 per iSLEEP, and these iSLEEPs arrive on 1st June 201x and are paid via bank transfer on 20^th June.

On 5th June 201x, UNE purchases 10 iSLEEPs for the library for a price of $2,100 per iSLEEP on credit. UNE then pays the iSLEEPs on 10th June 201x, after deducting an early payment discount of 10%.

On 7th June 201x, the UNE library returns two of the iSLEEPs that were purchased on 5th June 201x because they are damaged. Large Mart accepts the return and reduces the invoice (which will be paid on 10th June) for UNE by the full price of both iSLEEPs. Large Mart destroys the two damaged iSLEEPs as they are not in a condition that would allow them to be re-sold (Large Mart will not receive any compensation from Bpple).

On 8th June 201x, Large Mart purchases another 60 iSLEEPs from Bpple for a special price of $490. Normally the iSLEEP would currently cost $500, but Large Mart was able to receive a volume discount of $10 for each iSLEEP. The iSLEEPs arrive on the same day, and Large Mart pays this new delivery of iSLEEPs two days later.

On 12th June 201x, Large Mart sells 10 iSLEEPs to Wright College for $1,600 per iSLEEP. Wright College pays via bank transfer on the same day.

Question 4) Provide all journal entries that are necessary in the books of Large Mart to account for all inventory purchase, sales, and return transactions (including the payment and receipt of funds) of the new store, assuming that Large Mart uses a PERPETUAL INVENTORY SYSTEM and the AVERAGE WEIGHTED COST flow assumption.

Answer 1