Question

Problem 4-1A Preparing journal entries for merchandising activities-perpetual system LO P1, P2 Prepare journal entries to record the following merchandising transactions of Cabela's, which uses the perpetual Inventory system and the gross method. Hint: It will help to identify each receivable and payable, for example, record the purchase on July 1 in Accounts Payable-Boden. July 1 Purchased merchandise from Boden Company for 36,700 under credit terms of 2/15, 1/30, FOB shipping point, Invoice dated July 1. 2 501d merchandise to Creek Co. for under credit terms of 2/10, 1/60 FOB shipping point invoice dated July 2. The merchandise had cost $558. 3 Paid $125 cash for freight charges on the purchase of July 1. 8 Sold merchandise that had cost $2,000 for $2,400 cash. 9 Purchased merchandise from Leight Co. for $2,6ee under credit terms of 2/15, 1/6, FOB destination, invoice dated July 9. 11 Returned 56ee of merchandise purchased on July 9 from Leight Co. and debited its account payable for that amount. 12 Received the balance due from Creek Co. for the invoice dated July 2. net of the discount. 16 Paid the balance due to Boden Company within the discount period. 19 Sold merchandise that cost $1,000 to Art Co. for $1.500 under credit terms of 2/15, 1/60. FOB shipping point, invoice dated July 19. 21 Gave a price reduction allowance) of $250 to Art Co. For merchandise sold on July 19 and credited Art'accounts receivable for that amount. 24 Paid Leight Co. the balance due, net of discount. 30 Received the balance due from Art Co. for the invoice dated July 19, net of discount. 31 Sold merchandise that cost $5,500 to Creek Co. for $7, 4ee under credit terms of 2/1./60. FOB shipping point, invoice dated July 31.

Answer 1

Journal Entries:

No	Date	Account title and explanation	Debit	Credit
1	Jul 01	Merchandise inventory	$6,700
		Accounts payable-Boden		$6,700
		[To record purchases on account]
2	Jul 02	Accounts receivable-Creek	$900
		Sales		$900
		[To record Sales on account]
3	Jul 02	Cost of goods sold	$558
		Merchandise inventory		$558
		[To record cost of goods sold]
4	Jul 03	Merchandise inventory	$125
		Cash		$125
		[To record cash paid for freight]
5	Jul 08	Cash	$2,400
		Sales		$2,400
		[To record cash sales]
6	Jul 08	Cost of goods sold	$2,000
		Merchandise inventory		$2,000
		[To record cost of goods sold]
7	Jul 09	Merchandise inventory	$2,600
		Accounts payable-Leight		$2,600
		[To record purchase of inventory on account]
8	Jul 11	Accounts payable-Leight	$600
		Merchandise inventory		$600
		[To record purchase returns]
9	Jul 12	Cash	$882
		Sales discount [900 x 2%]	$18
		Accounts receivable-Creek		$900
		[To record cash collected from customers]
10	Jul 16	Accounts receivable-boden	$6,700
		Cash		$6,566
		Merchandise inventory [6,700 x 2%]		$134
		[To record payment for accounts payable]
11	Jul 19	Accounts receivable-Art	$1,500
		Sales		$1,500
		[To record sales on account]
12	Jul 19	Cost of goods sold	$1,000
		Sales		$1,000
		[To record cost of goods sold]
13	Jul 21	Sales returns and allowance	$250
		Accounts receivable-Art		$250
		[To record allowance given]
14	Jul 24	Accounts payable-Leight [2,600-600]	$2,000
		Cash		$1,960
		Merchandise inventory [2,000 x 2%]		$40
		[To record payment for accounts payable]
15	Jul 30	Cash	$1,225
		Sales Discount [1,250 x 2%]	$25
		Accounts receivable-Art [1,500-250 allowance]		$1,250
		[To record collection from customers]
16	Jul 31	Accounts receivable-Creek	$7,400
		Sales		$7,400
		[To record sales on account]
17	Jul 31	Cost of goods sold	$5,500
		Merchandise inventory		$5,500
		[To record cost of goods sold]