Question

ase and sales -perpetual 2.3) AP Instructions (a) Prepare the journal entries to record the above transactions for Olaf Company. (b) Prepare the journal entries to record the above transactions for DeVito Company. (c) Calculate the gross profit earned by DeVito on these transactions 5-6 The following merchandise transactions occurred in December. Both companies use a perpetual inventory system. Dec. 3 Pippen Company sold merchandise to Thomas Co. for $32,000, terms 2/10, n/30, FOB destination. This merchandise cost Pippen Company $18,000. 4 The correct company paid freight charges of $650. 8 Thomas Co. returned unwanted merchandise to Pippen. The returned merchandise had a sales price of $1,800 and a cost of $990. It was restored to inventory. 13 Pippen Company received the balance due from Thomas Co. Instructions (a) Prepare the journal entries to record these transactions on the books of Pippen Company (b) Prepare the journal entries to record these transactions on the books of Thomas Co. Assuming that Thomas Co. had a balance in Merchandise Inventory on December 1 of $6,000, determine the balance in the Merchandise Inventory account at the end of December for Thomas Co. E5-7 The following transactions were recorded by an inexperienced bookkeeper during the months of June and July for JillyBean Company. JillyBean Company uses a perpetual inventory system. June 10 A purchase of $4,000 of merchandise from Dan Dan Distributors was debited to Purchases and credited to Cash. The terms of the purchase were 2/10, n/30, FOB shipping point. 11 The invoice for freight in the amount of $225 for the delivery of merchandise purchased from Dan Dan nventory erpetual JAN

Answer 1

Requirement (a): In the books of Pippen (seller),

Date	Account title and Explanation	Debit	Credit
Dec.3	Accounts receivable	$32,000
	Sales revenue		$32,000
	[To record sales on account]
	Cost of goods sold	$18,000
	Inventory		$18,000
	[To record cost of goods sold]
Dec.4	Freight-out	$650
	Cash		$650
	[To record payment of freight]
Dec.8	Sales returns and allowance	$1,800
	Accounts receivable		$1,800
	[To record sales returns]
	Inventory	$990
	Cost of goods sold		$990
	[To record cost of sales returns]
Dec.13	Cash	$29,596
	Sales discount [30,200 x 2%]	$604
	Accounts receivable [32,000-1,800]		$30,200
	[To record collections from customers]

Requirement (b): In the books of Thomas Co.(Buyer),

Date	Account title and Explanation	Debit	Credit
Dec.3	Inventory	$32,000
	Accounts payable		$32,000
	[To record purchase of inventory on account]
Dec.8	Accounts payable	$1,800
	Inventory		$1,800
	[To record purchase returns]
Dec.13	Accounts payable [32,000-1,800]	$30,200
	Inventory [30,200 x 2%]		$604
	Cash		$29,596
	[To record cash paid for accounts payable]

Requirement (c):

T-Account:

Inventory
Dec.1	$6,000	Dec.8	$1,800
Dec.3	$32,000	Dec.13	$604
Dec.31 bal.	$35,596

Therefore ending balance of Inventory is $35,596.