Question

You are now hired by the Stan Sporting Goods store as an accountant. You are asked to enter the following trasactions in to the journals:

Transaction #1: December 17: Borrowed $60,000 from First American Bank and Trust by issuing a two-year note payable with a stated annual interest rate of 5%. The check was received from the bank and deposited.

Transaction #2: December 19: Received customer purchase order in the mail from the University of Southern Iowa (USI) for 100 shoulder pad sets at the price of $75 and 100 knee pads at the price of $30, approved their credit and shipped the goods. All goods ordered were shipped, except only 56 shoulder pad sets were available for shipment. Customer paid for the shipping cost. Invoice was also sent to the customer.

Transaction #3: December 22: Received merchandise and invoice from Velocity Sporting Goods as listed on the purchase order we sent to them. The invoiced total is $2845. All merchandise listed on PO was delivered in good condition and in the quantities ordered. The goods were immediately placed in the inventory warehouse.

Transaction #4: December 26: Received the 56 shoulder pads returned from USI (the return has been authorized by your company) for credit against their account balance. The check of payment for the remaining amount (after sales return) was received. The check was deposited.

Answer 1

#1: Bank A/C Dr $60,000

To Loan A/C $60,000

  

Interest Exp A/C Dr $6,000 ((60000*5%)*2)

To Interest Payable $6,000

#2:There is no journal entry when a purchase order is placed with a supplier. A sent purchase order will induce the supplier to send the requested goods.

#3 Debtor A/C Dr $2845

To Sale $2845

#4: Sales Return A/C Dr $ 4,200 (56*75)

To Cash $4,200