Question

Learning Objectives 2, 3 S5-6 Journalizing purchase and sales transactions Suppose Piranha.com sells 3,500 books on account for $17 each (cost of these books is $35,700) on October 10, 2018 to The Textbook Store. One hundred of these books (cost $1,020) were damaged in shipment, so Piranha.com later received the damaged goods from The Textbook Store as sales returns on October 13, 2018. Requirements 1. Journalize The Textbook Store's October 2018 transactions. 2. Journalize Piranha.com's October 2018 transactions. The company estimates sales returns at the end of each month. S5-1

Answer 1

1. In the books of Textbook store (Buyer):

Date	Account title and Explanation	Debit	Credit
Oct 10,2018	Inventory [3,500 x $17]	$59,500
	Accounts payable		$59,500
	[To record purchase of inventory on account]
October 13,2018	Accounts payable	$1,700
	Inventory [100 x $17]		$1,700
	[To record purchase returns]

2.In the books of Piranha.com (Seller):

Date	Account title and Explanation	Debit	Credit
Oct 10,2018	Accounts receivable	$59,500
	Sales revenue [3,500 x $17]		$59,500
	[To record sales on account]
	Cost of goods sold	$35,700
	Inventory		$35,700
	[To record cost of goods sold]
Oct 10,2018	Sales returns and allowance [100 x $17]	$1,700
	Accounts receivable		$1,700
	[To record sales returns]
	Inventory	$1,020
	Cost of goods sold		$1,020
	[To record cost of sales returns]