Question

Brief Exercise 5-04 

Prepare the journal entries to record the following transactions on Sheridan Company's books using a perpetual inventory system. 

(a) on March 2. Sheridan Company sold $944,100 of merchandise to Skysong Company on account terms 3/10, 130. The cost of the merchandise sold was 8529,100. 

(b) On March 6, Skysong Company returned $112,100 of the merchandise purchased on March 2. The cost of the merchandise returned was $60,100. 

(c) On March 12, Sheridan Company received the balance due from Skysong Company.

Answer 1

Under perpetual system of inventory, cost of goods sold are immediately recorded and inventory is credited
on the other hand in case of return reverse entry of same is passed.
No.	Date	Account title and explanation	Debit	Credit	Hint
(a)	March 2	Accounts Receivable	$ 944,100
		Sales Revenue		$ 944,100
		(To record sale of merchandise)
	March 2	Cost of goods sold	$ 529,100
		Inventory		$ 529,100
(b)	March 6	Sales Returns and Allowances	$ 112,100
		Accounts Receivable		$ 112,100
		(To record return of merchandise)
	March 6	Inventory	$    60,100
		Cost of goods sold		$    60,100
(c )	March 12	Cash	$ 807,040		(832000*97%)
		Sales Discounts	$    24,960		(832000*3%)
		Accounts Receivable		$ 832,000	(944100-112100)