Question

Journalize the following transactions for Nasheville Art Gift Shop. Assume Nasheville uses the gross method to record sales revenue. Explanations are not required. ​(Assume the company uses a perpetual inventory​ system.)

Feb. 3 Purchased $ 3,700 of merchandise inventory on account under terms 5​/10, ​n/EOM and FOB shipping point.

7 Returned $ 900 of defective merchandise purchased on February 3.

9 Paid freight bill of $ 450 on February 3 purchase.

10 Sold merchandise inventory on account for $ 6,000. Payment terms were 2​/15, ​n/30. These goods cost the company $ 3,000.

12 Paid amount owed on credit purchase of February ​3, less the return and the discount.

28 Received payment from the February 10 customer in full settlement of their debt.

Answer 1

	Date	Account titles and explanation	Debit	Credit	Calculations
	03-Feb	Merchandise inventory	$3,515		(3700*95%)
		Account payable		$3,515	(3700*95%)
	07-Feb	Account payable	$855		(900*95%)
		Merchandise inventory		$855	(900*95%)
	09-Feb	Merchandise inventory	$450
		Cash		$450
	10-Feb	Account receivable	$6,000
		Sales		$6,000
	10-Feb	Cost of goods sold	$3,000
		Inventory		$3,000
	12-Feb	Account payable	$2,660		(3515-855)
		Cash		$2,660
	28-Feb	Cash	$6,000		(discount not allowed as payment was made after 15 days by customer)
		Account receivable		$6,000
	Note:	The above question has been solved by net price method to record the purchase of inventory