Question

Sales Discounts & Returns Allbright Co. uses a perpetual inventory system, they incurred the following transactions: Feb. 10 Feb. 12 Feb. 12 Feb. 14 Feb. 18 Feb. 22 Purchased 80 units on account @$8 per unit, terms 2/10 n 30. Sold 60 units on credit @$22 per unit, terms 2/10 n 20. Returned 8 units purchased on Feb. 10th. Customer returned 12 units sold on Feb. 12th. Paid $564.48 of amount due from Feb. 10th. Collected $1,034.88 from units sold on Feb. 12th. Required: 1. Prepare the journal entries to record the above transactions, assuming Allbright uses the gross method to record purchase and sales discounts, 2. Repeat (1), assuming Allbright uses the net method to record purchase and sales discounts. 3. Repeat (1) and (2), assuming Allbright uses a periodic inventory system. 4. Prepare the Sales and Cost of Goods Sold section of the Income Statement.

Answer 1

Credit ($) Journal No. Date Account Titles and Explanation 1 10-Feb Purchase (80*8) Accounts payable (To record the credit purchase) Debit ($) 640.00 640.00 1,320.00 12-Feb Accounts receivable (60*22) Sales (To record the credit sales) 1,320.00 480.00 Cost of goods sold (60*8) Inventory (To record the cost of goods sold) 480.00 64.00 Accounts payable (8*8) Purchase return (To record the purchase return) 64.00 264.00 14-Feb Sales return (22*12) Accounts receivable (To record the sales return) 264.00 576.00 18-Feb Accounts payable (640-64) Purchase discount (576*2%) Cash (To record the payment made to suppliers) 11.52 564.48 1,034.88 21.12 22-Feb Cash Sale discount (1056*2%) Accounts receivable (1320-264) (To record the collection from debtors) 1,056.00 627.20 10-Feb Purchase (80*8)*98% Accounts payable (To record the credit purchase) 627.20 1,293.60 12-Feb Accounts receivable (60*22)*98% Sales (To record the credit sales) 1,293.60 470.40 Cost of goods sold (60*8)*98% Inventory (To record the cost of goods sold) 470.40 62.72 12-Feb Accounts payable (8*8)*98% Purchase return (To record the purchase return) 62.72 258.72 14-Feb Sales return (22*12) *98% Accounts receivable (To record the sales return) 258.72 564.48 18-Feb Accounts payable (627.20-62.72) Cash (To record the payment made to suppliers) 564.48 1,034.88 22-Feb Cash Accounts receivable (1293.60-258.72) (To record the collection from debtors) 1,034.88 All entries will be same as above. All goods are purchased at a single rate which is $8. So goods can be issued at this rate only even in periodic system.

Allbright Co. Income Statement (Partial) Sales revenue Less: Sales return Sales discount Cost of goods sold Gross profit Please give likes for the hard work. 1,320.00 264.00 21.12 480.00 554.88