Question

Cornerstone Exercise 6-21 (Algorithmic) Recording Sales Transactions Mathis Company and Reece Company use the perpetual inventory system. The following transactions occurred during the month of April: a. On April 1, Mathis Company purchased merchandise on account from Reece Company with credit terms of 2/10, n/30. The selling price of the merchandise was $3,500, and the cost of the merchandise sold was $2,450. b. On April 1, Mathis paid freight charges of $100 cash to have the goods delivered to its warehouse. c. On April 8, Mathis returned $1,000 of the merchandise which had originally cost Reece $700. d. On April 10, Mathis paid Reece the balance due. Required: Prepare the journal entries to record these transactions on the books of Reece Company. Assume that Reece uses the net method to record sales on account. For a compound transaction, if an amount box does not require an entry, leave it blank. April 1 Accounts Receivable 3,500 X Sales Revenue 2.500 X (Recorded sale on account) Cost of Goods Sold April Inventory 2,450 (Recorded cost of merchandise sold) Sales Revenue April 8 1.000 1.000 Accounts Receivable Recorded return of merchandise)

Answer 1

Journal entries (Net method ) :- Date Accounts Title & Explanation Debit $ Credits 01-Apr Accounts Receivable 3,430 To Sales Revenue (3500*98%) 3,430 (Entry for recording of sales under net method after adjusting discount) 01-Apr 2,450 Cost of goods sold To Inventory (Entry for cost of goods sold above) 2,450 08-Apr 980 Sales revenue (1000*98%) To Accounts Receivable (Entry for sales returns) 980 08-Apr 700 Inventory To Cost of goods sold (Entry for Cost of inventory of sales returned) 700 10-Apr 2,450 Cash (3430-980) To Accounts Receivable (Entry for cash received within discount period) 2,450