Question

Accounting for sales of Merchandise in a periode inventory System Powi cach of the was periode inventory system s h e following transaction the book of the seller Company assuming the Seller ses $1.000 of merchandise to e merchandise cost the ser $700 The merch of merchandise to the buyer on July 11 The terms of the sale are 2/10, / Dore Account Titles SS ROOV on July 12, the Buyer returns $200 of the merchandise for credit 2 recant payanen P 1200 1200 se en On July 16, the Seller receives the full amount owed by Buyer who takes advantage of the available cash discount Instead of transaction #4 above, assume that the Seller does not receive payment until July 23, after the discount period has expired.

Answer 1

Solution On date of sale of merchandise, the seller shall record the sales revenue by debiting the Accounts Receivables and crediting the Sales Revenue. The seller shall not record the cost of the merchandise sold on the date of sales, as it follows the periodic inventory system Account Titles and Explanation Date Debit Credit Accounts Receivable ($1,000x (1-02)) July 11 $980 Sales Revenue $980 (To record sale of merchandise on terms 2/10, n/30) On return of merchandise, the seller shall record the sales return by debiting the Sales Returns and allowances account and crediting the Accounts Receivable Account Titles and Explanation Date Debit Credit Sales Returns and Allowances account Accounts Receivable ($200 x (1-.02)) July 12 $196 $196 (To record return of merchandise sold) On July 16, the seller shall record the receipt of the full amount by debiting the cash account and crediting the Accounts Receivable account. Account Titles and Explanation Debit Credit Date $784 Cash July 16 Accounts Receivable ($980 $196) $784 (To record receipt of payment from customer) Since, the seller does not receive payment from the buyer until July 23, after the discount period has expired, the seller shall forfeit the sales discount on expiry of the discount period by debiting the Accounts receivable account and crediting the Sales discount forfeited account Account Titles and Explanation Date Debit Credit Accounts Receivable (($1000 $200) x 2%) $16 July 23 Sales discount forfeited $16 (To record sales discount forfeited)