Financial And Managerial Accounting
Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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Chapter 5, Problem 2PA

Sales-related transactions using perpetual inventory system

The following selected transactions were completed by Green Lawn Supplies Co., which sells irrigation supplies primarily to other businesses and occasionally to retail customers:

Chapter 5, Problem 2PA, Sales-related transactions using perpetual inventory system The following selected transactions were

Instructions

Journalize the entries to record the transactions of Green Lawn Supplies Co.

Expert Solution & Answer
Check Mark
To determine

Sales is an activity of selling the  inventory of a business.

To Record: The sale transactions of the company.

Explanation of Solution

Record the journal entry for the sale of inventory on account.

DateAccounts and ExplanationDebit ($)Credit ($)
March 2Accounts receivable18,711 (1) 
               Sales Revenue 18,711
 (To record the sale of inventory on account)  

Table (1)

Working Note:

Calculate the amount of accounts receivable.

Sales = $18,900

Discount percentage = 1%

  Amount of accounts receivable} = (SalesDiscount)=Sales(Sales×1%)= $18,900 – ($18,900×1%)= $18,900$189=$18,711 (1)

  • Accounts Receivable is an asset and it is increased by $18,711. Therefore, debit accounts receivable with $18,711.
  • Sales revenue is revenue and it increases the value of equity by $18,711. Therefore, credit sales revenue with $18,711.

Record the journal entry for cost of goods sold.

DateAccounts and ExplanationDebit ($)Credit ($)
March 2Cost of  Sold13,300 
  Inventory 13,300
 (To record the cost of goods sold)  

Table (2)

  • Cost of  sold is an expense account and it decreases the value of equity by $13,300. Therefore, debit cost of  sold account with $13,300.
  • Inventory is an asset and it is decreased by $13,300. Therefore, credit inventory account with $13,300.

Record the journal entry for the sale of inventory for cash.

DateAccounts and ExplanationDebit ($)Credit ($)
March 3Cash12,031 (3) 
 Sales Revenue 11,350
 Sales Tax Payable 681 (2)
 (To record the sale of inventory for cash)  

Table (3)

Working Notes:

Calculate the amount of sales tax payable.

Sales revenue = $11,350

Sales tax percentage = 6%

  Sales tax payable = (Sales×Sales tax percentage)=(Sales×6%)($11,350×6%)= $681

   (2)

Calculate the amount of cash received.

Sales revenue = $11,350

Sales tax payable = $681 (2)

  Cash received = (Sales+Sales tax payable)=$11,350+$681= $12,031

   (3)

  • Cash is an asset and it is increased by $12,031. Therefore, debit cash account with $12,031.
  • Sales revenue is revenue and it increases the value of equity by $11,350. Therefore, credit sales revenue with $11,350.
  • Sales tax payable is a liability and it is increased by $681. Therefore, credit sales tax payable account with $681.

Record the journal entry for cost of goods sold.

DateAccounts and ExplanationDebit ($)Credit ($)
March 3Cost of  Sold7,000 
  Inventory 7,000
 (To record the cost of goods sold)  

Table (4)

  • Cost of  sold is an expense account and it decreases the value of equity by $7,000. Therefore, debit cost of  sold account with $7,000.
  • Inventory is an asset and it is decreased by $7,000. Therefore, credit inventory account with $7,000.

Record the journal entry for the sale of inventory on account.

DateAccounts and ExplanationDebit ($)Credit ($)
March 4Accounts receivable55,400 
               Sales Revenue 55,400
 (To record the sale of inventory on account)  

Table (5)

  • Accounts Receivable is an asset and it is increased by $55,400. Therefore, debit accounts receivable with $55,400.
  • Sales revenue is revenue and it increases the value of equity by $55,400. Therefore, credit sales revenue with $55,400.

Record the journal entry for cost of goods sold.

DateAccounts and ExplanationDebit ($)Credit ($)
March 4Cost of  Sold33,200 
  Inventory 33,200
 (To record the cost of goods sold)  

Table (6)

  • Cost of  sold is an expense account and it decreases the value of equity by $33,200. Therefore, debit cost of  sold account with $33,200.
  • Inventory is an asset and it is decreased by $33,200. Therefore, credit inventory account with $33,200.

Record the journal entry for the sale of inventory for cash.

DateAccounts and ExplanationDebit ($)Credit ($)
March 5Cash31,800 (5) 
 Sales Revenue 30,000
 Sales Tax Payable 1,800 (4)
 (To record the sale of inventory for cash)  

Table (7)

Working Notes:

Calculate the amount of sales tax payable.

Sales revenue = $30,000

Sales tax percentage = 6%

  Sales tax payable = (Sales×Sales tax percentage)=(Sales×6%)($30,000×6%)= $1,800

   (4)

Calculate the amount of cash received.

Sales revenue = $30,000

Sales tax payable = $1,800 (2)

  Cash received = (Sales+Sales tax payable)=$30,000+$1,800= $31,800

   (5)

  • Cash is an asset and it is increased by $31,800. Therefore, debit cash account with $31,800.
  • Sales revenue is revenue and it increases the value of equity by $30,000. Therefore, credit sales revenue with $30,000.
  • Sales tax payable is a liability and it is increased by $1,800. Therefore, credit sales tax payable account with $1,800.

Record the journal entry for cost of goods sold.

DateAccounts and ExplanationDebit ($)Credit ($)
March 5Cost of  Sold19,400 
  Inventory 19,400
 (To record the cost of goods sold)  

Table (8)

  • Cost of  sold is an expense account and it decreases the value of equity by $19,400. Therefore, debit cost of  sold account with $19,400.
  • Inventory is an asset and it is decreased by $19,400. Therefore, credit inventory account with $19,400.

Record the journal entry for the cash receipt against accounts receivable.

DateAccounts and ExplanationDebit ($)Credit ($)
March 12Cash18,711 
 Accounts Receivable 18,711
 (To record the receipt of cash against accounts receivables)  

Table (9)

  • Cash is an asset and it is increased by $18,711. Therefore, debit cash account with $18,711.
  • Accounts Receivable is an asset and it is increased by $18,711. Therefore, debit accounts receivable with $18,711.

Record the journal entry for the sale of inventory for cash.

DateAccounts and ExplanationDebit ($)Credit ($)
March 14Cash13,700 
 Sales Revenue 13,700
 (To record the sale of inventory for cash)  

Table (10)

  • Cash is an asset and it is increased by $13,700. Therefore, debit cash account with $13,700.
  • Sales revenue is revenue and it increases the value of equity by $13,700. Therefore, credit sales revenue with $13,700.

Record the journal entry for cost of goods sold.

DateAccounts and ExplanationDebit ($)Credit ($)
March 14Cost of  Sold8,350 
  Inventory 8,350
 (To record the cost of goods sold)  

Table (11)

  • Cost of  sold is an expense account and it decreases the value of equity by $8,350. Therefore, debit cost of  sold account with $8,350.
  • Inventory is an asset and it is decreased by $8,350. Therefore, credit inventory account with $8,350.

Record the journal entry for the sale of inventory on account.

DateAccounts and ExplanationDebit ($)Credit ($)
March 16Accounts receivable27,225 (6) 
               Sales Revenue 27,225
 (To record the sale of inventory on account)  

Table (12)

Working Note:

Calculate the amount of accounts receivable.

Sales = $27,500

Discount percentage = 1%

  Amount of accounts receivable} = (SalesDiscount)=Sales(Sales×1%)= $27,500 – ($27,500×1%)= $27,500$275=$27,225 (6)

  • Accounts Receivable is an asset and it is increased by $27,225. Therefore, debit accounts receivable with $27,225.
  • Sales revenue is revenue and it increases the value of equity by $27,225. Therefore, credit sales revenue with $27,225.

Record the journal entry for cost of goods sold.

DateAccounts and ExplanationDebit ($)Credit ($)
March 16Cost of  Sold16,000 
  Inventory 16,000
 (To record the cost of goods sold)  

Table (13)

  • Cost of  sold is an expense account and it decreases the value of equity by $16,000. Therefore, debit cost of  sold account with $16,000.
  • Inventory is an asset and it is decreased by $16,000. Therefore, credit inventory account with $16,000.

Record the journal entry for sales return.

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

March 18Customer Refunds Payable 4,752 (7) 
         Accounts Receivable  4,752
 (To record sales returns)   

Table (14)

Calculate the amount of refund owed to the customer.

Sales return = $4,800

Discount percentage = 1%

  Amount of refund owed to customer = SalesReturnDiscount=Salesreturn(Salesreturn×discount)= $4,800($4,800×1%)=$4,800$48=$4,752

   (7)

  • Customer refunds payable is a liability account and it is decreased by $4,752. Therefore, debit customer refunds payable account with $4,752.
  • Accounts Receivable is an asset and it is decreased by $4,752. Therefore, credit account receivable with $4,752.

Record the journal entry for the return of the .

DateAccounts and ExplanationDebit ($)Credit ($)
March 18 Inventory2,900 
 Estimated Returns Inventory 2,900
 (To record the return of the )  

Table (15)

  • Inventory is an asset and it is increased by $2,900. Therefore, debit inventory account with $2,900.
  • Estimated retunrs inventory is an expense account and it increases the value of equity by $2,900. Therefore, credit estimated returns inventory account with $2,900.

Record the journal entry for the sale of inventory on account.

DateAccounts and ExplanationDebit ($)Credit ($)
March 19Accounts receivable8,085 (8) 
               Sales Revenue 8,085
 (To record the sale of inventory on account)  

Table (16)

Working Note:

Calculate the amount of accounts receivable.

Sales = $8,250

Discount percentage = 2%

  Amount of accounts receivable} = (SalesDiscount)=Sales(Sales×2%)= $8,250 – ($8,250×2%)= $8,250$165=$8,085 (8)

  • Accounts Receivable is an asset and it is increased by $8,085. Therefore, debit accounts receivable with $8,085.
  • Sales revenue is revenue and it increases the value of equity by $8,085. Therefore, credit sales revenue with $8,085.

Record the journal entry.

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

March 19Accounts Receivable 75 
 Cash  75
 (To record freight charges paid)   

Table (17)

  • Accounts Receivable is an asset and it is increased by $75. Therefore, debit accounts receivable with $75.
  • Cash is an asset and it is decreased by $75. Therefore, credit cash account with $75.

Record the journal entry for cost of goods sold.

DateAccounts and ExplanationDebit ($)Credit ($)
March 19Cost of  Sold5,000 
  Inventory 5,000
 (To record the cost of goods sold)  

Table (18)

  • Cost of  sold is an expense account and it decreases the value of equity by $5,000. Therefore, debit cost of  sold account with $5,000.
  • Inventory is an asset and it is decreased by $5,000. Therefore, credit inventory account with $5,000.

Record the journal entry for the cash receipt against accounts receivable.

DateAccounts and Explanation

Debit

($)

Credit ($)
March 26Cash22,473 (9) 
 Accounts Receivable 22,473
 (To record the receipt of cash against accounts receivables)  

Table (19)

Calculate the amount of cash received.

Net accounts receivable = $22,473

Customer refunds payable = $4,752

  Amount of cash received} = Net accounts receivableCustomer refunds payable= $27,225$4,752=$22,473

   (9)

  • Cash is an asset and it is increased by $22,473. Therefore, debit cash account with $22,473.
  • Accounts Receivable is an asset and it is increased by $22,473. Therefore, debit accounts receivable with $22,473.

Record the journal entry for the cash receipt against accounts receivable.

DateAccounts and Explanation

Debit

($)

Credit ($)
March 28Cash8,160 (10) 
 Accounts Receivable 8,160
 (To record the receipt of cash against accounts receivables)  

Table (20)

Calculate the amount of cash received.

Net accounts receivable = $8,085

Freight charges = $75

  Amount of cash received} = Net accounts receivable+Freight charges= $8,085+$75=$8,160

   (10)

  • Cash is an asset and it is increased by $8,160. Therefore, debit cash account with $8,160.
  • Accounts Receivable is an asset and it is increased by $8,160. Therefore, debit accounts receivable with $8,160.

Record the journal entry for the cash receipt against accounts receivable.

DateAccounts and Explanation

Debit

($)

Credit ($)
March 31Cash55,400 
 Accounts Receivable 55,400
 (To record the receipt of cash against accounts receivables)  

Table (21)

  • Cash is an asset and it is increased by $55,400. Therefore, debit cash account with $55,400.
  • Accounts Receivable is an asset and it is increased by $55,400. Therefore, debit accounts receivable with $55,400.

Record the journal entry for delivery expense.

DateAccounts and ExplanationDebit ($)Credit ($)
March 31Delivery expense5,600 
 Cash 5,600
 (To record the payment of delivery expenses)  

Table (22)

  • Delivery expense is an expense account and it decreases the value of equity by $5,600. Therefore, debit delivery expense account with $5,600.
  • Cash is an asset and it is decreased by $5,600. Therefore, credit cash account with $5,600.

Record the journal entry for credit card expense.

DateAccounts and ExplanationDebit ($)Credit ($)
April 3Credit card expense940 
 Cash 940
 (To record the payment of credit card expenses)  

Table (23)

  • Credit card expense is an expense account and it decreases the value of equity by $940. Therefore, debit credit card expense account with $940.
  • Cash is an asset and it is decreased by $940. Therefore, credit cash account with $940.

Record the journal entry for credit card expense.

DateAccounts and ExplanationDebit ($)Credit ($)
April 15Sales tax payable6,544 
 Cash 6,544
 (To record the payment of credit card expenses)  

Table (24)

  • Sales tax payable is a liability account and it is decreased by $6,544. Therefore, debit customer refunds payable account with $6,544.
  • Cash is an asset and it is decreased by $6,544. Therefore, credit cash account with $6,544.

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Chapter 5 Solutions

Financial And Managerial Accounting

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