Question

Prepare journal entries to record the following merchandising transactions of Wright'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—Martin.)

Jul.		1		Purchased merchandise from Martin Company for $9,600 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1.
Jul.		2		Sold merchandise to Clark Co. for $2,700 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $1,620.
Jul.		3		Paid $845 cash for freight charges on the purchase of July 1.
Jul.		8		Sold merchandise that had cost $3,200 for $5,300 cash.
Jul.		9		Purchased merchandise from Mitchell Co. for $4,000 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9.
Jul.		11		Returned $800 of merchandise purchased on July 9 from Mitchell Co. and debited its account payable for that amount.
Jul.		12		Received the balance due from Clark Co. for the invoice dated July 2, net of the discount.
Jul.		16		Paid the balance due to Martin Company within the discount period.
Jul.		19		Sold merchandise that cost $3,400 to Gonzalez Co. for $4,800 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19.
Jul.		21		Gave a price reduction (allowance) of $1,000 to Gonzalez Co. for merchandise sold on July 19 and credited Gonzalez’s accounts receivable for that amount.
Jul.		24		Paid Mitchell Co. the balance due, net of discount.
Jul.		30		Received the balance due from Gonzalez Co. for the invoice dated July 19, net of discount.
Jul.		31		Sold merchandise that cost $6,400 to Clark Co. for $10,600 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.

Answer 1

Solution:

Journal Entries:

No.	Date	Account Title and Explanation	Debit ($)	Credit ($)
1.	July 1	Merchandise inventory	9,600
		Accounts payable - Martin		9,600
		(To record purchase of merchandise inventory)
2.	July 2	Accounts receivable - Clark Co.	2,700
		Sales revenue		2,700
		Cost of goods sold	1,620
		Merchandise inventory		1,620
		(To record the sold of merchandise inventory)
3.	July 3	Freight inward	845
		Cash		845
		(To record the freight charges)
4.	July 8	Cash	5,300
		Sales revenue		5,300
		Cost of goods sold	3,200
		Merchandise inventory		3,200
		(To record the merchandise sold)
5.	July 9	Merchandise inventory - Mitchell Co.	4,000
		Accounts payable		4,000
		(To record the purchased merchandise inventory)
6.	July 11	Accounts payable - Mitchell co.	800
		Purchase returns		800
		( To record the returned merchandise inventory)
7.	July 12	Cash	2,646
		Sales discount - Clark co.	54 ($2,700 × 2%)
		Accounts receivable		2,700
		(To record the received balance)
8.	July 16	Accounts payable - Martin co.	9,600
		Purchase discount		96 ($9,600 × 1%)
		Cash		9,504 ($9,600 - $96)
		(To record the paid balance)
9.	July 19	Accounts receivable - Gonzalez co.	4,800
		Sales revenue		4,800
		Cost of goods sold	3,400
		Merchandise inventory		3,400
		(To record the sold merchandise inventory)
10.	July 21	Sales allowance	1,000
		Accounts receivable - Gonzalez co.		1,000
		( To record the price reduction)
11.	July 24	Accounts payable - Mitchell co.	4000
		Purchase discount		80 ($4,000 × 2%)
		Cash		3,920 ($4,000 - $80)
		(To record paid balance)
12.	July 30	Cash	4,704($4,800 - 96)
		Sales discount	96 ($4,800 ÷ 2%)
		Accounts receivable - Gonzalez co.		4,800
		(To record the received balance )
13.	July 31	Accounts receivable - Clark Co.	10,600
		Sales revenue		10,600
		Cost of goods sold	6,400
		Merchandise inventory		6,400
		(To record the sold of merchandise inventory)