Question

Prepare journal entries to record the following merchandising transactions of Royal Company, which applies the perpetual inventory system. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Chiefs).

July1 Purchased merchandise from Chief Company for $4,000 under credit terms of 1/15, n/30, FOB shipping point, invoice dated July 1.

2 Sold merchandise to Sporting Co. for $1,900 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 2. The merchandise had cost $500.

3 Paid $125 cash for freight charges on the purchase of July 1.

8 Sold merchandise that had cost $1,300 for $1,700 cash.

12 Received the balance due from Sporting Co. for the invoice dated July 2, net of the discount.

16 Paid the balance due to Chief Company within the discount period.

19 Sold merchandise that cost $800 to Art Co. for $1,200 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19.

21 Issued a $200 credit memorandum to Art Co. for an allowance on goods sold on July 19.

  30 Received the balance due from Art Co. for the invoice dated July 19, net of discount.

Answer 1

Journal entry

Date	account and explanation	debit	credit
July 1	Merchandise inventory	4000
	Account payable-Chief		4000
	(To record purchase)
July 2	Account receivable-Sporting Co	1900
	Sales revenue		1900
	(To record sales)
	Cost of goods sold	500
	Merchandise inventory		500
	(To record cost of goods sold)
July 3	Merchandise inventory	125
	Cash		125
	(To record freight)
July 8	Cash	1700
	Sales revenue		1700
	(To record sales)
	Cost of goods sold	1300
	Merchandise inventory		1300
	(To record cost of goods sold)
July 12	Cash	1862
	Sales discount	38
	Account receivable-Sporting Co		1900
	(To record collection)
July 16	Account payable-Chief	4000
	Cash		3960
	Merchandise inventory		40
	(To record amount paid)
July 19	Account receivable-Art Co	1200
	Sales revenue		1200
	(To record sales)
	Cost of goods sold	800
	Merchandise inventory		800
	(To record cost of goods sold)
July 21	Sales return and allowance	200
	Account receivable-Art Co		200
	(To record sales return and allowance)
July 31	Cash	980
	Sales discount	20
	Account receivable-Art Co		1000
	(To record collection)