Question

1. On November 1 Chilton Systems purchases merchandise for $1,500 on credit with terms of 2/5 n/30, FOB shipping point invoice dated November 1 

2. On November 5, Chilton Systems pays cash for the November 1 purchase 

3. On November 7, Chilton Systems discovers and returns $200 of defective merchandise purchased on November 1 for a cash refund 

4. On November 10. Chilton Systems pays $90 cash for transportation costs with the November 1 purchase. 

5. On November 13, Chilton Systems sells merchandise for $1600 on credit. The cost of the merchandise is $800. 

6. On November 16, the customer returns merchandise from the November 13 transaction. The returned items sell for $300 and cost $130. The merchandise is returned to inventory.

 Prepare journal entries to record each of the merchandising transactions assuming that the periodic inventory system is used if no entry is required for a particular transaction, select "No journal entry required in the first account field.)

Answer 1

Periodic inventory system

Date	General Journal	Debit	Credit
Nov. 1	Purchases	1500
	Accounts payable		1500
	(To record merchandise purchased on account)
Nov. 5	Accounts payable	1500
	Purchase discount (2% x $1500)		30
	Cash		1470
	(To record payment on account)
Nov. 7	Cash [$200 x (1 - 0.02)]	196
	Purchase returns and allowances		196
	(To record cash refund for purchase returns)
Nov. 10	Freight-in	90
	Cash		90
	(To record transportation costs incurred on purchases)
Nov. 13	Accounts receivable	1600
	Sales revenue		1600
	(To record sales on account)
Nov. 13	No journal entry required
Nov. 16	Sales returns and allowances	300
	Accounts receivable		300
	(To record sales returns)
Nov. 16	No journal entry required

Note: Under the periodic inventory system, no journal entry is recorded for the cost of goods sold/returned at the time of the sale/sales return. The cost of the goods sold is computed at the end of the accounting period.