Prepare journal entries to record the following merchandising transactions of IKEA, which uses the perpetual inventory system and gross method. Hint: It will help to identify each receivable and payable; for example, record the purchase on May 2 in Accounts Payable—Havel. May 2 Purchased merchandise from Havel Co. for $10,000 under credit terms of 1∕15, n∕30, FOB shipping point, invoice dated May 2. 4 Sold merchandise to Rath Co. for $11,000 under credit terms of 2∕10, n∕60, FOB shipping point, invoice dated May 4. The merchandise had cost $5,600. 5 Paid $250 cash for freight charges on the purchase of May 2. 9 Sold merchandise that had cost $2,000 for $2,500 cash. 10 Purchased merchandise from Duke Co. for $3,650 under credit terms of 2∕15, n∕60, FOB destination, invoice dated May 10. 12 Returned $650 of merchandise purchased on May 10 from Duke Co. and debited its account payable for that amount. 14 Received the balance due from Rath Co. for the invoice dated May 4, net of the discount. 17 Paid the balance due to Havel Co. within the discount period. 20 Sold merchandise that cost $1,450 to Tamer Co. for $2,800 under credit terms of 2∕15, n∕60, FOB shipping point, invoice dated May 20. 22 Gave a price reduction (allowance) of $300 to Tamer Co. for merchandise sold on May 20 and credited Tamer’s accounts receivable for that amount. 25 Paid Duke Co. the balance due, net of the discount. 30 Received the balance due from Tamer Co. for the invoice dated May 20, net of discount and allowance. 31 Sold merchandise that cost $3,600 to Rath Co. for $7,200 under credit terms of 2∕10, n∕60, FOB shipping point, invoice dated May 31.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
Prepare
inventory system and gross method. Hint: It will help to identify each receivable and payable; for
example, record the purchase on May 2 in Accounts Payable—Havel.
May 2 Purchased merchandise from Havel Co. for $10,000 under credit terms of 1∕15, n∕30, FOB
shipping point, invoice dated May 2.
4 Sold merchandise to Rath Co. for $11,000 under credit terms of 2∕10, n∕60, FOB shipping
point, invoice dated May 4. The merchandise had cost $5,600.
5 Paid $250 cash for freight charges on the purchase of May 2.
9 Sold merchandise that had cost $2,000 for $2,500 cash.
10 Purchased merchandise from Duke Co. for $3,650 under credit terms of 2∕15, n∕60, FOB destination,
invoice dated May 10.
12 Returned $650 of merchandise purchased on May 10 from Duke Co. and debited its account
payable for that amount.
14 Received the balance due from Rath Co. for the invoice dated May 4, net of the discount.
17 Paid the balance due to Havel Co. within the discount period. 20 Sold merchandise that cost $1,450 to Tamer Co. for $2,800 under credit terms of 2∕15, n∕60,
FOB shipping point, invoice dated May 20.
22 Gave a price reduction (allowance) of $300 to Tamer Co. for merchandise sold on May 20 and
credited Tamer’s
25 Paid Duke Co. the balance due, net of the discount.
30 Received the balance due from Tamer Co. for the invoice dated May 20, net of discount and
allowance.
31 Sold merchandise that cost $3,600 to Rath Co. for $7,200 under credit terms of 2∕10, n∕60,
FOB shipping point, invoice dated May 31.
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