Question

Prepare journal entries to record the following merchandising transactions of Thompson'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—Knight.)

Jul.		1		Purchased merchandise from Knight Company for $11,600 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1.
Jul.		2		Sold merchandise to Taylor Co. for $3,700 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $2,220.
Jul.		3		Paid $1,245 cash for freight charges on the purchase of July 1.
Jul.		8		Sold merchandise that had cost $4,400 for $7,300 cash.
Jul.		9		Purchased merchandise from Parker Co. for $5,000 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9.
Jul.		11		Returned $1,000 of merchandise purchased on July 9 from Parker Co. and debited its account payable for that amount.
Jul.		12		Received the balance due from Taylor Co. for the invoice dated July 2, net of the discount.
Jul.		16		Paid the balance due to Knight Company within the discount period.
Jul.		19		Sold merchandise that cost $4,800 to Perry Co. for $6,800 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19.
Jul.		21		Gave a price reduction (allowance) of $1,400 to Perry Co. for merchandise sold on July 19 and credited Perry’s accounts receivable for that amount.
Jul.		24		Paid Parker Co. the balance due, net of discount.
Jul.		30		Received the balance due from Perry Co. for the invoice dated July 19, net of discount.
Jul.		31		Sold merchandise that cost $7,600 to Taylor Co. for $12,600 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31. Journalize the merchandising transactions. The General Ledger, trial balance, and schedules of accounts receivable and accounts payable will be updated based on your entries.

Answer 1

Date	General Journal	Debit	Credit
July 01	Merchandise inventory	$11,600
	Accounts payable—Knight		$11,600
July 02	Accounts receivable—Taylor co.	$3,700
	Sales		$3,700
July 02	Cost of goods sold	$2,220
	Merchandise inventory		$2,220
July 03	Merchandise inventory	$1,245
	Cash		$1,245
July 08	Cash	$7,300
	Sales		$7,300
July 08	Cost of goods sold	$4,400
	Merchandise inventory		$4,400
July 09	Merchandise inventory	$5,000
	Accounts payable— Parker Co.		$5,000
July 11	Accounts payable— Parker Co.	$1,000
	Merchandise inventory		$1,000
July 12	Cash	$3,626
	Sales discounts	$74
	Accounts receivable—Taylor co.		$3,700
July 16	Accounts payable—Boden	$11,600
	Merchandise inventory		$116
	Cash		$11,484
July 19	Accounts receivable— Perry Co	$6,800
	Sales		$6,800
July 19	Cost of goods sold	$4,800
	Merchandise inventory		$4,800
July 21	Sales returns and allowances	$1,400
	Accounts receivable— Perry Co.		$1,400
July 24	Accounts payable— Parker Co.	$4,000
	Merchandise inventory		$80
	Cash		$3,920
July 30	Cash	$5,292
	Sales discounts	$108
	Accounts receivable— Perry Co		$5,400
July 31	Accounts receivable—Taylor Co.	$12,600
	Sales		$12,600
July 31	Cost of goods sold	$7,600
	Merchandise inventory		$7,600

July		12		Sales Discounts ($3,700 × 2%) = $74
		16		Merchandise Inventory ($11,600× 1%) = $116
		24		Merchandise Inventory ($4,000 × 2%) = $80
		30		Sales Discounts: ([$6,800 – $1,400] × 2%) = $108