Question

Journalize the following transactions for the seller, Jackson Company, using the gross method to account for sales discounts. Assume a perpetual inventory system. Make sure to enter the day for each separate transaction.

May	1		Sold goods costing $8,400 to Powell Company on account, $14,000, terms 2/10, n/30. The goods are sold FOB shipping point, freight prepaid by seller, $390.
May	7		Powell Company returned damaged merchandise previously purchased on account, $1,000.
May	11		Received the amount due from Powell Company.

Note: The entry to record the shipping payment to the delivery company is not required in this problem.

Answer 1

Answer:

Gross method

Journal Entries:

Date	Account title and Explanation	Debit	Credit
May 1	Accounts receivable	$14,000
	Sales revenue		$14,000
	[To record sales on account]
	Cost of goods sold	$8,400
	Inventory		$8,400
	[To record cost of goods sold]
May 7	Sales returns and allowance	$1,000
	Accounts receivable		$1,000
	[To to record sales returns]
May 11	Cash	$12,740
	Sales discount [13,000 x 2%]	$260
	Accounts receivable [14,000-1,000 returns]		$13,000
	[To record collections from customers]

Explanations:

i.On May 7, No information about cost of sales returns. So, Assumed that goods returns do not replace the exiting inventory. Therefore no entry for cost of sales returns.

ii. Given that, No entry required for Shipping payment. So, No entry made for shipping payment.