Exercise 4-12 (Static) Recording purchases, sales, returns, and shipping LO P1, P2 Following are the merchandising transactions of Dollar Store. November 1 Dollar Store purchases merchandise for $1,500 on terms of 2/5, n/30, FOB shipping point, invoice dated November 1. November 5 Dollar Store pays cash for the November 1 purchase. November 7 Dollar Store discovers and returns $200 of defective merchandise purchased on November 1, and paid for on I November 5, for a cash refund. November 10 Dollar Store pays $90 cash for transportation costs for the November 1 purchase. November 13 Dollar Store sells merchandise for $1,600 with terms n/30. The cost of the merchandise is $800. November 16 Merchandis) is returned to the Dollar Store from the November 13 transaction. The returned items are priced at $160 and cost $80; the items were not damaged and were returned to inventory. Journalize the above merchandising transactions for the Dollar Store assuming it uses a perpetual inventory system and the gross method.

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Financial Transaction Analysis

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business, at least two accounts should be affected I.e. both the debit side and the credit side should be equal. The Accounting Equation is