Journal Entries for Merchandise Transactions on Seller's and Buyer's Books-Perpetual System
The following are selected transactions for Kim, Inc, during the month of June:
June 21 Sold and shipped on account to Lowery Company, $4,000 (52,000 cost of merchandise. With terms of 2/10.30
28 Lowery Company returned defective merchandise billed at 5400 on June 21 ($200 cost.)
30 Received from Lowery Company a check for full settlement of the June 21 transaction
Required
Prepare the necessary Journal entries for (a) Kim, Inc, and (b) Lowery Company. Both companies use the perpetual Inventory system.
Date | Particulars | debit | Credit |
Jun21 | Sold Merchandise to lower company in terms of 2/10,n/30 | ||
Lower company debtor to Sales Account | $4000 | $4000 | |
Jun21 | Cost of merchandise sold to Lower company | ||
Lower Company debtor to Manufacturing Account | $2000 | $2000 | |
Jun28 | Merchandise returned by Lower company | ||
Sales return account debtor to Lower company | $400 | $400 | |
Cost of merchandise returned by Lower company | |||
Manufacturing account debtor to Lower company | $200 | $200 | |
Jun30 | Received amount due from Lower Company | ||
Bank account(cheque) debtor to Lower Company | $4000 | $4000 |
Profitability Analysis
Net Sales= $200000
Operating Profit= Net Sales- Cost of goods sold- Operating expenses= $200000-$110000-$40000=$50000
Gross Profit= Operating Profit+Other Income= $50000+$25000=$75000
Gross Profit ratio= Gross Profit/Net sales= $75000/$200000= 3/8=0.35=35%
Operating Profit ratio= Operating Profit/ Net Sales= $50000/$200000= 1/4=0.25= 25%
Date | Particulars | Debit | Crredit |
Jun1 | Purchased Merchandise with 2/10 and n/30 terms | ||
Purchase account debtor to other company account sales a/c | $10000 | $10000 | |
Jun3 | Freight account debtor to cash account | $550 | $550 |
Jun7 | Other company sales return A/c debtor to crushing dis company | $600 | &600 |
Jun10 | Other company sales a/c debtor to crushing dis company cash account | $9400 | $9400 |
Jun13 | Customer purchase a/c debtor to Crushing dis sales a/c | $10000 | $10000 |
Jun16 | crushing dis sales return a/c debtor to customer purchase a/c | $750 | $750 |
Jun22 | Crushing dis Cash account debtor to customer a/c | $9250 | $9250 |
The following are selected transactions for Kim, Inc, during the month of June:
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