Question

Novak Corp. completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Novak Corp. showed Cash of $5,500 and Common Stock of $5,500 May 1 Purchased merchandise on account from Gray's Wholesale Supply $4,200, terms 2/10, n/30 2 Sold merchandise on account $1,600, terms 1/10, n/30. The cost of the merchandise sold was $1,200 5 Received credit from Gray's Wholesale Supply for merchandise returned $400 9 Received collections in full, less discounts, from customers billed on sales of $1,600 on May 2 10 Paid Gray's Wholesale Supply in full, less discount. 11 Purchased supplies for cash $350 12 Purchased merchandise for cash $1,500 15 Received refund for poor quality merchandise from supplier on cash purchase $150 17 Purchased merchandise from Amland Distributors $1,400, FOB shipping point, terms 2/10, n/30. 19 Paid freight on May 17 purchase $170 24 Sold merchandise for cash 2,900. The merchandise sold had a cost of $1,800 25 Purchased merchandise on account from Horvath, Inc. $600, FOB destination, terms 2/10, n/30 27 Paid Amland Distributors in full, less discount. 29 Made refunds to cash customers for defective merchandise $70. The returned merchandise had a fair value of $30. 31 Sold merchandise on account $1,500, terms n/30. The cost of the merchandise sold was $500 Novak Corp. 's chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 126 Supplies, No. 201 Accounts Payable, No. 311 Common Stock, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold. ournalize the transactions using a perpetual inventory system. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter "O" for the amounts. Record journal entries in the order presented in the problem.)

Answer 1

Journal entries for the transactions during the month of May is shown as follows:-

Journal Entries (Amount in $)

Date	Account Titles and Explanations	Debit	Credit
May 1	Inventory	4,200
	Accounts Payable		4,200
	(To record the purchases on account on 1/10, n/30 terms)
May 2	Accounts Receivable	1,600
	Sales Revenue		1,600
	(To record the sales on account on 1/10, n/30 terms)
May 2	Cost of Goods Sold	1,200
	Inventory		1,200
	(To record the cost of goods sold)
May 5	Accounts Payable	400
	Inventory		400
	(To record the merchandise returned)
May 9	Cash ($1,600-$16)	1,584
	Sales Discounts ($1,600*1%)	16
	Accounts Receivable		1,600
	(To record the cash received from customer on discount of 1%)
May 10	Accounts Payable ($4,200-$400)	3,800
	Inventory ($3,800*2%)		76
	Cash ($3,800-$76)		3,724
	(To record the payment made with 2% discount)
May 11	Supplies	350
	Cash		350
	(To record the supplies purchased for cash)
May 12	Inventory	1,500
	Cash		1,500
	(To record the inventory purchased for cash)
May 15	Cash	150
	Inventory		150
	(To record the refund on inventory returned)
May 17	Inventory	1,400
	Accounts Payable		1,400
	(To record the inventory purchased on account)
May 19	Inventory	170
	Cash		170
	(To record the freight paid on inventory purchased)
May 24	Cash	2,900
	Sales Revenue		2,900
	(To record the cash sales)
May 24	Cost of Goods Sold	1,800
	Inventory		1,800
	(To record the cost of goods sold on cash)
May 25	Inventory	600
	Accounts Payable		600
	(To record the inventory purchased on account)
May 27	Accounts Payable	1,400
	Inventory ($1,400*2%)		28
	Cash ($1,400-$28)		1,372
	(To record the payment made with 2% discount)
May 29	Sales returns and Allowances	70
	Cash		70
	(To record the cash refund to customer)
May 29	Inventory	30
	Cost of Goods Sold		30
	(To record the fair value of goods returned)
May 31	Accounts Receivable	1,500
	Sales Revenue		1,500
	(To record the sales on account)
May 31	Cost of Goods Sold	500
	Inventory		500
	(To record the cost of goods sold)