Question

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Problem 5-01A (Video) Sarasota's Book Warehouse distributes hardcover books to retail stores and extends credit terms of 1/10, n/30 to all of its customers. At the end of May, Sarasota's inventory consisted of books purchased for $1,600. During June, the following merchandising transactions occurred. June 1 Purchased books on account for $1,300 from Kline Publishers, FOB destination, terms 1/10, n/30 The appropriate party also made a cash payment of $50 for the freight on this date. 3 Sold books on account to Reading Rainbow for $2,800. The cost of the books sold was $1,020 6 Received $200 credit for books returned to Kline Publishers. 9 Paid Kline Publishers in full, less discount. 15 Received payment in full from Reading Rainbow 17 Sold books on account to Blanco Books for $1,500. The cost of the books sold was $900. 20 Purchased books on account for $1,100 from Detz Publishers, FOB destination, terms 1/15, n 30. The appropriate party also made a cash payment of $40 for the freight on this date 24 Received payment in full frorm Blanco Books. 26 Paid Dietz Publishers in full, less discount. 28 Sold books on account to Reddy Bookstore for $1,500. The cost of the books sold was $950. 30 Granted Reddy Bookstore $130 credit for books returned costing $78 Sarasota's Book Warehouse's chart of accounts includes the following: No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 201 Accounts Payable, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold

Answer 1

Solution:

Journal Entries.

In Perpetual Inventory System, the purchases or sales are recorded net of discount initially. Once the payment is done, the adjustment of discount is made.

Date	General Journal	Debit	Credit
June.1	Inventory (1300*99% net of discount)	$1,287
	Accounts Payable		$1,287
June.1	Inventory	$50
	Cash		$50
June.3	Accounts Receivable	$2,800
	Sales Revenue		$2,800
	Cost of Goods Sold	$1,020
	Merchandise Inventory		$1,020
June.6	Accounts Payable	$200
	Sales Discount		$200
June.9	Accounts Payable (1287 - 200)	$1,087
	Cash		$1,087
June.15	Cash	$2,800
	Accounts Receivable		$2,800
June.17	Accounts Receivable	$1,500
	Sales Revenue		$1,500
	Cost of Goods Sold	$900
	Inventory		$900
June.20	Inventory (1100*99% net of discount)	$1,089
	Accounts Payable		$1,089
	Inventory	$40
	Cash		$40
June.24	Cash	$1,500
	Accounts Receivable		$1,500
June.26	Accounts Payable	$1,089
	Cash		$1,089
June.28	Accounts Receivable	$1,500
	Sales Revenue		$1,500
	Cost of Goods Sold	$950
	Inventory		$950
June.30	Sales Return and Allowance	$130
	Accounts Receivable		$130
	Inventory	$78
	Cost of Goods Sold		$78

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