Question

Nov. 1 Dollar Store purchases merchandise for $1,300 on terms of 2/5, n/30, FOB shipping point, invoice dated November 1.

5 Dollar Store pays cash for the November 1 purchase.

7 Dollar Store discovers and returns $200 of defective merchandise purchased on November 1, and paid for on November 5, for a cash refund.

10 Dollar Store pays $65 cash for transportation costs for the November 1 purchase.

13 Dollar Store sells merchandise for $1,404 with terms n/30. The cost of the merchandise is $702.

16 Merchandise is returned to the Dollar Store from the November 13 transaction. The returned items are priced at $300 and cost $150; the items were not damaged and were returned to inventory.

Journalize the above merchandising transactions for the Dollar Store assuming it uses a perpetual inventory system and the gross method.

Answer 1

		Debit	Credit
Nov 01	Merchandise Inventory	1300
	Accounts Payable		1300
Nov 05	Accounts Payable	1300
	Merchandise Inventory		26	=1300*2%
	Cash		1274
Nov 07	Cash	196		=200*(1-2%)
	Merchandise Inventory		196
Nov 10	Merchandise Inventory	65
	Cash		65
Nov 13	Accounts Receivable	1404
	Sales		1404
Nov 13	Cost of goods sold	702
	Merchandise Inventory		702
Nov 16	Sales returns and allowances	300
	Accounts Receivable		300
Nov 16	Merchandise Inventory	150
	Cost of goods sold		150