Question

Sales-Related and Purchase-Related Transactions Using Perpetual Inventory System

The following were selected from among the transactions completed by Babcock Company during November of the current year:

Nov. 3.	Purchased merchandise on account from Moonlight Co., list price $89,000, trade discount 30%, terms FOB destination, 2/10, n/30.
4.	Sold merchandise for cash, $40,040. The cost of the goods sold was $20,620.
5.	Purchased merchandise on account from Papoose Creek Co., $47,400, terms FOB shipping point, 2/10, n/30, with prepaid freight of $830 added to the invoice.
6.	Returned $11,900 ($17,000 list price less trade discount of 30%) of merchandise purchased on November 3 from Moonlight Co.
8.	Sold merchandise on account to Quinn Co., $16,430 with terms n/15. The cost of the merchandise sold was $10,090.
13.	Paid Moonlight Co. on account for purchase of November 3, less return of November 6.
14.	Sold merchandise on VISA, $238,360. The cost of the goods sold was $140,040.
15.	Paid Papoose Creek Co. on account for purchase of November 5.
23.	Received cash on account from sale of November 8 to Quinn Co.
24.	Sold merchandise on account to Rabel Co., $51,400, terms 1/10, n/30. The cost of the goods sold was $36,370.
28.	Paid VISA service fee of $3,360.
30.	Paid Quinn Co. a cash refund of $6,530 for returned merchandise from sale of November 8. The cost of the returned merchandise was $3,240. Required: Journalize the transactions. Nov. 3 Merchandise Inventory Accounts Payable-Moonlight Co. Nov. 4-sale Cash Sales Nov. 4-cost Cost of Goods Sold Merchandise Inventory Nov. 5 Merchandise Inventory Accounts Payable-Papoose Creek Co. Nov. 6 Accounts Payable-Moonlight Co. Merchandise Inventory Nov. 8 Accounts Receivable-Quinn Co. Sales Nov. 8 Cost of Goods Sold Merchandise Inventory Nov. 13 Accounts Payable-Moonlight Co. Cash Nov. 14-sale Cash Sales Nov. 14-cost Cost of Goods Sold Merchandise Inventory Nov. 15 Accounts Payable-Papoose Creek Co. Cash Nov. 23 Cash Accounts Receivable-Quinn Co. Nov. 24-sale Accounts Receivable-Rabel Co. Sales Nov. 24-cost Cost of Goods Sold Merchandise Inventory Nov. 28 Credit Card Expense Cash Nov. 30-refund Customers Refunds Payable Cash Nov. 30-cost Merchandise Inventory Estimated Returns Inventory

Answer 1

Perpetual inventory

Net method used

Journal Entries:

Date	Account title and Explanation	Debit	Credit
Nov. 3	Merchandise Inventory [89,000 x 70% x 98%]	$61,054
	Accounts Payable-Moonlight Co.		$61,054
	[To record purchase of merchandise on account]
Nov. 4-sale	Cash	$40,040
	Sales		$40,040
	[To record cash sales]
Nov. 4-cost	Cost of Goods Sold	$20,620
	Merchandise Inventory		$20,620
	[To record cost of goods sold]
Nov. 5	Merchandise Inventory [47,400 x 98%]	$46,452
	Accounts Payable-Papoose Creek Co.		$46,452
	[To record purchase of merchandise on account]
Nov. 6	Accounts Payable-Moonlight Co. [11,900 x 98%]	$11,662
	Merchandise Inventory		$11,662
	[To record purchase returns]
Nov. 8	Accounts Receivable-Quinn Co.	$16,430
	Sales		$16,430
	[To record sales on account]
Nov. 8	Cost of Goods Sold	$10,090
	Merchandise Inventory		$10,090
	[To record cost of goods sold]
Nov. 13	Accounts Payable-Moonlight Co. [61,054-11,662 returns]	$49,392
	Cash		$49,392
	[To record cash paid for accounts payable]
Nov. 14-sale	Cash	$238,360
	Sales		$238,360
	[To record cash sales]
Nov. 14-cost	Cost of Goods Sold	$140,040
	Merchandise Inventory		$140,040
	[To record cost of goods sold]
Nov. 15	Accounts Payable-Papoose Creek Co.	$46,452
	Cash		$46,452
	[To record payment for accounts payable]
Nov. 23	Cash	$16,430
	Accounts Receivable-Quinn Co.		$16,430
	[To record collections from customers]
Nov. 24-sale	Accounts Receivable-Rabel Co.	$51,400
	Sales		$51,400
	[To records sales on account]
Nov. 24-cost	Cost of Goods Sold	$36,370
	Merchandise Inventory		$36,370
	[To record cost of goods sold]
Nov. 28	Credit Card Expense	$3,360
	Cash		$3,360
	[To record credit card expense]
Nov. 30-refund	Customers Refunds Payable	$6,530
	Cash		$6,530
	[To record customer refund payable]
Nov. 30-cost	Merchandise Inventory	$3,240
	Estimated Returns Inventory		$3,240
	[To record cost of sales returns]