
Concept explainers
Concept Introduction:
Journal Entries:
A
To prepare:
Journal entries for Blink Company for merchandising transactions.

Answer to Problem 1GLP
Solution:
The journal entries for Blink Company for merchandising transactions are −
Date | Accounts Descriptions | Debit | Credit |
Jul-01 | Merchandise Inventory | 6,000 | |
Accounts Payable - Boden | 6,000 | ||
(To record purchase of merchandise inventory) | |||
Jul-02 | Accounts Receivables - Creek Co. | 900 | |
Sales | 900 | ||
(To record sales of inventory) | |||
Jul-02 | Cost of Goods sold | 500 | |
Merchandise Inventory | 500 | ||
(To record cost of goods sold for the sales on July 2) | |||
Jul-03 | Merchandise Inventory | 125 | |
Cash | 125 | ||
(To record payment of freight on merchandise inventory) | |||
Jul-08 | Cash | 1,700 | |
Sales | 1,700 | ||
(To record cash sales of inventory) | |||
Jul-11 | Merchandise Inventory | 2,200 | |
Accounts Payable - Leight Co. | 2,200 | ||
(To record purchase of merchandise inventory) | |||
Jul-12 | Accounts Payable - Leight Co. | 200 | |
Merchandise Inventory | 200 | ||
(To record purchase return to Leight Co.) | |||
Jul-12 | Cash | 882 | |
Sales Discounts | 18 | ||
Accounts Receivables - Creek Co. | 900 | ||
(To record collection of cash within discount period) | |||
Jul-16 | Accounts Payable - Boden | 6,000 | |
Merchandise Inventory | 60 | ||
Cash | 5,940 | ||
(To record payment of accounts payable within discount period) | |||
Jul-19 | 1,200 | ||
Sales | 1,200 | ||
(To record sales of inventory) | |||
Jul-19 | Cost of goods sold | 800 | |
Merchandise Inventory | 800 | ||
(To record cost of goods sold for the sales on July 19) | |||
Jul-21 | Merchandise Inventory | 200 | |
Accounts Receivable - Art. Co. | 200 | ||
(To record issue of credit memo to Art Co.) | |||
Jul-24 | Accounts Payable - Leight Co. | 2000 | |
Merchandise Inventory | 40 | ||
Cash | 1960 | ||
Jul-30 | Cash | 980 | |
Sales Discounts | 20 | ||
Accounts Receivable - Art. Co. | 1000 | ||
(To record cash receipt from Art Co. within discount period) | |||
Jul-31 | Accounts Receivables - Creek Co. | 7,000 | |
Sales | 7,000 | ||
(To record sales of inventory) | |||
Cost of Goods sold | 4,800 | ||
Merchandise Inventory | 4,800 | ||
(To record cost of goods sold for the sales on July 31) |
Explanation of Solution
The above journal entries can be explained as −
July 1: The merchandise is purchased from Boden Co. So merchandise is debited and Accounts payable − Havel co. is credited.
July 2: The merchandised inventory is sold to Creek Co. so sales are recorded with a credit and since, the goods are sold on account, so Accounts receivable − Creek Co is debited.
July 2: The cost of goods sold for sales on July 2 has been recorded. Thus, the merchandise inventory is credited as it is getting reduce and costs of goods sold is debited as it is an expense.
July 3: The freight expense of $ 125 is paid on the purchases of July 1, thus added to the merchandise costs. So, merchandise is increased with a debit and cash is credited.
July 8: The goods are sold on cash basis, thus cash is debited and sales revenue is credited.
July 9: The merchandise is purchased from Leight Co. So merchandise is debited and Accounts payable − Leight Co. is credited
July 9: The purchase returns are recorded in this entry. Thus, the Accounts payable − Leight Co. is debited and merchandise inventory is credited.
July 12: The balance due from Creek Co. is received after deducting the sales discounts. The sales discounts are calculated as −
The given information is −
- Credit sales = $ 900
- Terms of credit sales = 2/10, n/60
- Discount rate = 2 % (if it is paid within a period of 10 days)
Thus, the sales discount will be = $ 18
The amount of cash will be calculated as −
Thus, the cash to be received = $ 882.
July 16: The balance after deducting the discounts is paid to Boden Co. for the merchandise purchased on July 2. The discount received will be recorded under merchandise inventory. The discount will be calculated as −
The given information is −
- Credit purchases = $ 6,000
- Terms of credit sales = 1/15, n/30
- Discount rate = 1 % (if it is paid within a period of 15 days)
Thus, the sales discount will be = $ 60
The amount of cash will be calculated as −
Thus, the cash to be paid = $ 5,940.
July 19: The merchandised inventory is sold to Art Co. so sales are recorded with a credit and since, the goods are sold on account, so Accounts receivable − Art Co. is debited.
July 19: The cost of goods sold for sales on July 19 has been recorded. Thus, the merchandise inventory is credited as it is getting reduce and costs of goods sold is debited as it is an expense.
July 21: The sales returns are recorded in this entry, thus, merchandise inventory is debited and Accounts receivable − Art Co. is credited.
July 24: The balance after deducting the discounts is paid to Leight Co. for the merchandise purchased on May 9. The credit memo received from Leight will also be deducted from the balance.
The discount received will be recorded under merchandise inventory. The discount will be calculated as −
The given information is −
- Credit purchases balance = $ 2,000
- Terms of credit sales = 2/15, n/60
- Discount rate = 2 % (if it is paid within a period of 15 days)
Thus, the discount will be = $ 40
The amount of cash will be calculated as −
Thus, the cash to be paid = $ 1,960.
July 30: The balance due from Art Co. is received after deducting the sales discounts.
The balance will be calculated as −
The sales discounts are calculated as −
The given information is −
- Credit sales balance = $ 1,000
- Terms of credit sales = 2/15, n/60
- Discount rate = 2 % (if it is paid within a period of 15 days)
Thus, the sales discount will be = $ 20
The amount of cash will be calculated as −
Thus, the cash to be received = $ 980.
July 31:The merchandised inventory is sold to Creek Co. so sales are recorded with a credit and since, the goods are sold on account, so Accounts receivable − Creek Co. is debited.
July 31: The cost of goods sold for sales on July 31 has been recorded. Thus, the merchandise inventory is credited as it is getting reduce and costs of goods sold is debited as it is an expense.
Thus, the journal entries for Blink Company have been prepared.
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