Explanation Perpetual inventory system: The method or system of maintaining, recording, and adjusting the inventory perpetually throughout the year, is referred to as perpetual inventory system. Gross method: Under gross method, sales and purchases of merchandises are recorded at the full invoice price (gross amount) without the deduction of discounts. Sales discounts: The merchandisers offer a reduction in sales price on initial sales, to accelerate the sale on account payments, by their customers within the sale terms promptly. Such a reduction in sales price is referred to as sales discount. This is recorded as contra-revenue account. Sales returns and allowances: Sometimes, customers either return goods due to manufacturing defects, or accept to keep the defective goods for a reduction in sale price. That amount of goods returned, or reduced amount in sale price, is referred to as sales returns and allowances. These are recorded as contra-revenue accounts. Prepare journal entries for Merchandiser A. Date Account title and Explanation Post ref. Amount Debit Credit May 03 Merchandise Inventory (+A) ( 2 , 000 units × $ 10 ) $20,000 Accounts payable (+L) $20,000 (To record the purchase of merchandise on account ) May 05 Accounts receivable – Company M (+A) ( 1 , 500 units × $ 14 ) $21,000 Sales revenue (+SE) $21,000 (To record the sale of merchandise on account with terms of 2 / 10 , n / 60 ) May 05 Cost of goods sold (-SE) $15,000 Inventory (-A) $15,000 (To record the cost of merchandise sold) May 07 Sales return and allowances (-SE) ( 125 units × $ 14 ) $1,750 Accounts receivable– Company M (-A) $1,750 (To record the merchandise returned by customers) May 07 Inventory (+A) $1,250 Cost of goods sold (+SE) $1,250 (To record the cost of merchandise returned by customers) May 08 Sales return and allowances (-SE) $300 Accounts receivable– Company M (-A) $300 (To record the allowance for scuffed items) May 15 Cash (2) (+A) $18,751 Sales discounts (1) (-SE) $379 Accounts receivable (-A) $18,950 (To record the sales discount and payment from customers for the goods sold) Table (1) May 03: To record the 2,000 units of products purchased at $10 on account, credit terms of 2 / 10 , n / 60 : Merchandise Inventory is an asset and the value is increased due to the credit purchases on account. Therefore, debit Merchandise Inventory account with $20,000 ( 2 , 000 units × $ 10 )

6th Edition

ISBN: 9781259726910

Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher: McGraw-Hill Education

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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…

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Chapter 4, Problem 4E

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Prepare journal entries to record the following transactions of Merchandiser A.

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Financial Accounting Fundamentals

Ch. 4 - Prob. 1MCQ Ch. 4 - Prob. 2MCQ Ch. 4 - Prob. 3MCQ Ch. 4 - Prob. 4MCQ Ch. 4 - Prob. 5MCQ Ch. 4 - Prob. 1DQ Ch. 4 - Prob. 2DQ Ch. 4 - Prob. 3DQ Ch. 4 - Prob. 4DQ Ch. 4 - Prob. 5DQ

Ch. 4 - Prob. 6DQ Ch. 4 - Prob. 7DQ Ch. 4 - Prob. 8DQ Ch. 4 - Prob. 9DQ Ch. 4 - Prob. 10DQ Ch. 4 - Prob. 11DQ Ch. 4 - Prob. 12DQ Ch. 4 - Prob. 13DQ Ch. 4 - Prob. 14DQ Ch. 4 - Prob. 15DQ Ch. 4 - Prob. 1QS Ch. 4 - Prob. 2QS Ch. 4 - Prob. 3QS Ch. 4 - Prob. 4QS Ch. 4 - Prob. 5QS Ch. 4 - Prob. 6QS Ch. 4 - Prob. 7QS Ch. 4 - Prob. 8QS Ch. 4 - Prob. 9QS Ch. 4 - Prob. 10QS Ch. 4 - Prob. 11QS Ch. 4 - Prob. 12QS Ch. 4 - Prob. 13QS Ch. 4 - Prob. 14QS Ch. 4 - Prob. 15QS Ch. 4 - Prob. 16QS Ch. 4 - Prob. 17QS Ch. 4 - Prob. 18QS Ch. 4 - Prob. 19QS Ch. 4 - Prob. 20QS Ch. 4 - Prob. 21QS Ch. 4 - Prob. 22QS Ch. 4 - Prob. 23QS Ch. 4 - Prob. 1E Ch. 4 - Prob. 2E Ch. 4 - Prob. 3E Ch. 4 - Prob. 4E Ch. 4 - Prob. 5E Ch. 4 - Prob. 6E Ch. 4 - Prob. 7E Ch. 4 - Prob. 8E Ch. 4 - Prob. 9E Ch. 4 - Prob. 10E Ch. 4 - Prob. 11E Ch. 4 - Prob. 12E Ch. 4 - Exercise 4-13 Physical count error and...Ch. 4 - Prob. 14E Ch. 4 - Prob. 15E Ch. 4 - Prob. 16E Ch. 4 - Prob. 17E Ch. 4 - Prob. 18E Ch. 4 - Prob. 19E Ch. 4 - Prob. 20E Ch. 4 - Prob. 21E Ch. 4 - Prob. 22E Ch. 4 - Prob. 23E Ch. 4 - Prob. 1AP Ch. 4 - Prob. 2AP Ch. 4 - Prob. 3AP Ch. 4 - Prob. 4AP Ch. 4 - Prob. 5AP Ch. 4 - Prob. 6AP Ch. 4 - Prob. 1BP Ch. 4 - Prob. 2BP Ch. 4 - Prob. 3BP Ch. 4 - Prob. 4BP Ch. 4 - Prob. 5BP Ch. 4 - Prob. 6BP Ch. 4 - Prob. 4SP Ch. 4 - Prob. 1BTN Ch. 4 - Prob. 2BTN Ch. 4 - Prob. 3BTN Ch. 4 - Prob. 4BTN Ch. 4 - Prob. 5BTN Ch. 4 - Prob. 7BTN Ch. 4 - Prob. 9BTN

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