Question

You are Coke Co., the buyer: On March 1 you purchase $50,000 of inventory from Coke Co. with the terms 2/10, n/ 30. On March 4 you return $2,000 of the inventory and request that your account be credited. On March 11 you pay the full amount you owe Coke Co. Instructions: Record the journal entries for March 1, March 4, and March 11: March 1: March 4: March 11:

Answer 1

Solution:

Question:1

Date	Account Titles and Explanation	Debit	Credit
Mar. 1	Inventory	$ 50,000
	Account Payable - Coke Co.		$ 50,000
	(Being inventory purchased on account)
Mar. 4	Account Payable - Coke Co.	$    2,000
	Inventory		$    2,000
	(Being inventory returned and received credit)
Mar. 11	Account Payable - Coke Co.	$ 48,000
	Inventory($ 48,000 *2%)		$        960
	Cash		$ 47,040
	(Being accounts payable paid)

Question:2

Date	Account Titles and Explanation	Debit	Credit
Mar. 1	Account Receivable - Aurora Co.	$        50,000
	Sales Revenue		$        50,000
	(Being sales made on account)
Mar. 1	Cost Of Goods Sold	$        30,000
	Inventory		$        30,000
	( Being Cost of goods sold)
Mar. 4	Sales Returns	$          2,000
	Account Receivable - Aurora Co.		$          2,000
	( Being Sales returns)
Mar. 4	Inventory	$          1,200
	Cost Of Goods Sold		$          1,200
	( Being Cost of goods sold recorded)
Mar. 11	Cash	$        47,040
	Sales Discount ($ 48,000 * 2%)	$              960
	Account Receivable - Aurora Co.		$        48,000
	( Being account receivable collected)

Notes:

1) Cost of goods sold % = Sales / Cost of goods sold = $ 50,000 / $ 30,000 = 60%

2) Sales returns value = $ 2,000

3) Cost of goods sold value of returned sales = $2000 *60% =$1,200

4) Under perpetual system, any purchase discount will reduced from inventory.