Wholesaler Transactions
The Toy Shop Company sells toys and games to retail stores. The firm offers a trade discount of 40 percent on toys and 30 percent on games. Its credit sales and sales returns and allowances transactions for August are shown on page 230. The general ledger accounts used to record these transactions are listed below. The balance shown for Accounts Receivable is as of the beginning of August.
INSTRUCTIONS
1. Open the general ledger accounts and enter the balance of Accounts Receivable for August 1.
2. Set up an accounts receivable subsidiary ledger. Open an account for each of the credit customers listed below and enter the balances as of August 1.
Carter’s Department Store | $28,900 |
Play Therapy Toy Stores | 30,500 |
Delux Bookstores |
|
Pemberton Toy Center |
|
Metroplex Game Center | 19,010 |
Hinton Game Store |
|
3. Record the transactions in a sales journal and in a general journal. Use 9 as the page number for the sales journal and 25 as the page number for the general journal. Be sure to enter each sale at its net price.
4. Post the individual entries from the sales journal and the general journal.
5. Total and rule the sales journal as of August 31.
6. Post the column total from the sales journal to the proper general ledger accounts.
7. Prepare the heading and the Revenue section of the firm’s income statement for the month ended August 31.
8. Prepare a schedule of accounts receivable for August 31.
9. Check the total of the schedule of accounts receivable against the balance of the Accounts Receivable account in the general ledger. The two amounts should be equal.
GENERAL LEDGER ACCOUNTS
111 | Accounts Receivable, $78,410 Dr |
401 | Sales |
451 | Sales Returns and Allowances |
DATE | TRANSACTIONS |
August 1 | Sold toys to Carter’s Department Store; issued Invoice 1001, which shows a list price of $18,500 and a trade discount of 40 percent. |
5 | Sold games to the Delux Bookstores; issued Invoice 1002, which shows a list price of $20,500 and a trade discount of 30 percent. |
9 | Sold games to the Metroplex Game Center; issued Invoice 1003, which shows a list price of $7,500 and a trade discount of 30 percent. |
14 | Sold toys to the Play Therapy Toy Stores; issued Invoice 1004, which shows a list price of $25,500 and a trade discount of 40 percent. |
18 | Accepted a return of all the games shipped to the Metroplex Game Center because they were damaged in transit; issued Credit Memo 151 for the original sale made on Invoice 1003 on August 9. |
22 | Sold toys to Hinton Game Store; issued Invoice 1005, which shows a list price of $18,400 and a trade discount of 40 percent. |
26 | Sold games to the Carter’s Department Store; issued Invoice 1006, which shows a list price of $21,600 and a trade discount of 30 percent. |
30 | Sold toys to the Pemberton Toy Center; issued Invoice 1007, which shows a list price of $22,800 and a trade discount of 40 percent. |
Analyze: What is the effect on net sales if the company offers a series of trade discounts on toys (25 percent, 15 percent) instead of a single 40 percent discount?
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