Question

Create Journal Entries for the following.

Chapter 5 problem Homework Webster Company was established on July 1". Its sales terms are 2/10, n/30. Credit terms for its purchases vary with the supplier. Selected transactions are given below. Unless noted, all transactions are on account and involve merchandise for resale. Webster uses the perpetual inventory system. Jul i Jul 1 Jul 2 Jul 3 Jul 5 Jul S Jul8 Company received $40,000 cash in exchange for common stock Purchased goods from Dawson, Inc., $2,500; terms 1/10, /30. FOB shipping point. Purchased goods from Penn Company, $4,500; terms 2/10, 1/30. FOB destination Paid freight on shipment from Dawson, $300. Sold merchandise to Ward, Inc. $1,400 ($1,100 cost). Terms FOB destination. Paid $90 freight on July 5 shipment to Ward, Inc. Returned $500 worth of goods purchased July 1" from Dawson, Inc. because they were defective. Received $200 worth of merchandise ($150 cost) returned from Ward, Inc. Items placed back into Inventory. Jul 9 Jul 10 Paid Dawson, Inc. the amount due. Jul 10 Purchase merchandise from Dorn Company for $2,600 terms 2/10, n/30. FOB shipping point. Jul 11 Paid freight on shipment from Dorn Company, $150. Jul 14 Received the amount due from Ward, Inc. Jul 15 Sold merchandise to Colby Corporation, $3,200 ($2,400 cost). Jul 16 Mailed a check to Penn Company for the amount due on the July 2nd invoice. Jul 18 Received an allowance of $200 from Dorn Company for slightly defective merchandise purchased on July 10h Jul 19 Paid Dorn Company the amount due. Jul 24 Received the amount due from Colby Corporation.

Answer 1

Credit Journal Entries in The Books of Webster Company Date Paticulars Jul-01 Cash Common Stock (To record company received cash in exchange for the common stock) Debit $ 40,000.00 $ 40,000.00 As nothing is mentioned - it is assumed Common stock is sokd at Par/Face Value $ 2,500.00 $ 2,500.00 Jul-01 Inventory Dawson Inc., (To record Purchased goods from Dawson Inc on account, 1/10,n/30 - FOB Shipping Point) $ 4,500.00 $ 4,500.00 Jul-02 Inventory Penn Company (To record Purchased goods from Penn Company on account, 2/10, 1/30 - FOB Destination) $ 300.00 Jul-03 Inventory Cash (To record Cash Paid for Freight towards Goods Purchased from Dawson Inc.) 0.00 $ 1,400.00 $ 1,400.00 $ 90.00 Jul-05 Ward Inc., Sales Freight-Out Expenses Cash (To record Goods Sold to Ward Inc., on Account/Credit and Freight-out paid by us Books As Expense as the same was on FOB destination)) $ 90.00 (Here Freight-out is Selling Expenditure, hence Debited) $ 1,100.00 Jul-05 Cost of Goods Sold Inventory (To record of Cost of Goods Sold) $ 1,100.00 $ 500.00 Jul-08 Dawson Inc., Inventory (To record Return of Defective Inventory to Dawson Inc) 500.00 $ 200.00 Jul-09 Sales Returns Ward Inc., (To record return of inventory sold to ward inc.) 200.00 $ 150.00 Jul-09 Inventory Cost of goods sold (To record Cost of Goods sold for return of inventory sold to ward inc.) $ 2,000.00 Jul-10 Dawson Inc, Cash Inventory (To record payment to dawson inc with in 10 days and availed discount, charged the same to inventory) $ $ 1,980.00 20.00 (Since Webster company is following perpetual inventory system cash discount directly charged to inventory to reduce inventory cost)

$ 2,600.00 $ 2,600.00 Jul-10 Inventory Dorn Company (To record Purchased goods from Dorn Company on account, 2/10, 1/30 - FOB Shipping) $ 150.00 Jul-11 Inventory Cash (To record Cash Paid for Freight towards Goods Purchased from Dorn company)) $ 150.00 $ 1,200.00 Jul-14 Cash Ward Inc., (To record amount received from Ward Inc.,) $ 1,200.00 $ 3,200.00 Jul-15 Colby Corporation Sales (To record Goods Sold to Colby Corporation on Account/Credit) $ 3,200.00 $ 2,400.00 Jul-15 Cost of Goods Sold Inventory (To record of Cost of Goods Sold to Colby Corporation) $ 2,400.00 $ 4,500.00 Jul-16 Penn Company Bank (To record payment to PENN company through Cheque) $ 4,500.00 $ 200.00 $ 200.00 Jul-18 Dorn Company Purchase Allowances (To record Receipt of Allowance from Dorn Company-Adjusted from Amount Payable) $ 200.00 $ 200.00 Jul-18 Cost of Goods Sold Inventory (To record cost adjustment to inventory on Receipt of Allowance from Dorn Company) $ 2,400.00 Jul-19 Dorn Company Cash Inventory $ $ 2,352.00 48.00 (To record Payment of Amount to Dorn Company after discount of 2% as the payment is with in 10 days - Cash discount received adjusted through Inventory) $ 3,200.00 Jul-24 Cash Coldy Corporation (To record receipt of amount from Colby corporation) $ 3,200.00