Question

1. Inventory Transactions - Please type answers

The Journal Company has provided you with the following inventory transactions:

Oct 1	Journal Company purchased 2,500 red blankets from Warm Vendor with the following terms 2/10, n/30 FOB destination, and unit price is $26.
Oct 3	Received freight bill for Oct 1 transaction, $600 and paid
Oct 5	Returned 200 blankets from Oct 1 transaction
Oct 9	Paid the amount due to Warm Vendor
Oct 12	Sold 1,700 blankets to City Customer, terms 2/10, n/30, FOB Shipping Point, selling price is $58.
Oct 22	City Customer paid total amount owed
Oct 21	Journal Company purchased 1,900 red blankets from Warm Vendor with the following terms 2/10, n/30 FOB shipping point, unit price is $26
Oct 23	Received freight bill for Oct 21 transaction, $700 and paid.

Required

1. Prepare all of the necessary journal entries, using the following accounts (as we did in class): Cash, Accounts Receivable, Purchases (Inventory), Purchase Returns (Inventory), Inventory, Accounts Payable, Purchase Discounts, Freight-In, Sales, Sales Discounts, Sales Returns, Cost of Goods Sold.
2. Summarize your data and prepare the partial income statement, as we did in class.

3.	Explain the difference between Gross Account Receivables
	Vs Net Account Receivables.

           

Answer 1

A. Journal entries :

Oct 1 - DR. Purchases    $65,000

CR. Warm Vendor $65,000

Oct 3 - DR. Freight-in $600

CR. Cash $600

Oct 5 - DR. Warm Vendors $5,200

CR. Purchase Returns $5,200

Oct 9 - DR. Warm Vendor $59,200

CR. Purchase Discount $1,196

CR. Cash $58,604

Oct 12 - DR. City Customer $98,600

CR. Sales $98,600

Oct 21 - DR. Purchases $49,400

CR. Warm Vendor $49,400

Oct 22 - DR. Cash $96,628

DR. Sales Discount $1,972

CR. City Customer $98,600

Oct 23 - DR. Freight-in $700

CR. Cash $700

B. Statement showing Partial Income Statement :

Sales		$ 98,600
Cost of Goods Sold
Beginning Inventory	$ 0
Purchases (net)	$ 109,304
Cost of Goods Available	$ 109,304
Less : Ending Inventory	($ 65,104)
Cost of Goods Sold		($ 44,200)
Gross Profit		$ 54,400

C. The difference between Gross account receivables and Net account receivables is that the net amount is inclusive of sales discount and bad debts. It is the net amount receivable from the customer.