Corporate Financial Accounting
Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 5, Problem 5.2BPR

Sales-related transactions using perpetual inventory system

The following selected transactions were completed by Green Lawn Sup plies Co., which sells irrigation supplies primarily to wholesalers and occasionally to retail customers:

July 1. Sold merchandise on account to Landscapes Co., $33,450, terms FOB shipping point, n/eom. The cost of the goods sold was $20,000.
2. Sold merchandise for $86,000 plus 8% sales tax to retail cash customers. The cost of the goods sold was $51,600.
5. Sold merchandise on account to Peacock Company, $17,500, terms FOB destination, 1/10, n/30. The cost of the goods sold was $10,000.
8. Sold merchandise for $112,000 plus 8% sales tax to retail customers who used VISA cards. The cost of the goods sold was $67,200.
13. Sold merchandise to customers who used MasterCard cards, $96,000. The cost of the goods sold was $57,600.
14. Sold merchandise on account to Loeb Co., $16,000, terms FOB shipping point, 1/10, n/30. The cost of the goods sold was $9,000.
15. Received check for amount due from Peacock Company for sale on July 5.
16. Issued credit memo for $3,000 to Loeb Co. for merchandise returned from the sale on July 14, The cost of the merchandise returned was $1,800.
18. Sold merchandise on account to Jennings Company, $11,350, terms FOB shipping point, 2/10, n/30. Paid $475 for freight and added it to the invoice. The cost of the goods sold was $6,800.
24. Received check for amount due from Loeb Co. for sale on July 14 less credit memo of July 16.
28. Received check for amount due from Jennings Company for sale of July 18.
31. Paid Black Lab Delivery Service $8,550 for merchandise delivered during July to customers under shipping terms of FOB destination.
31. Received check for amount due from Landscapes Co. for sale of July 1.
Aug. 3. Paid Hays Federal Bank $3,770 for service fees for handling MasterCard and VISA sales during July.
10. Paid $41,260 to state sales tax division for taxes owed on sales.

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.

Answer to Problem 5.2BPR

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

Date Accounts and Explanation Debit ($) Credit ($)
July 1 Accounts receivable 33,450  
                Sales Revenue   33,450
  (To record the sale of inventory on account)    

Table (1)

Explanation of Solution

Explanation

  • Accounts Receivable is an asset and it is increased by $33,450. Therefore, debit accounts receivable with $33,450.
  • Sales revenue is revenue and it increases the value of equity by $33,450. Therefore, credit sales revenue with $33,450.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
July 1 Cost of  Sold 20,000  
   Inventory   20,000
  (To record the cost of goods sold)    

Table (2)

Explanation

  • Cost of  sold is an expense account and it decreases the value of equity by $20,000. Therefore, debit cost of  sold account with $20,000.
  • Inventory is an asset and it is decreased by $20,000. Therefore, credit inventory account with $20,000.

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

Date Accounts and Explanation Debit ($) Credit ($)
July 2 Cash 92,880 (2)  
  Sales Revenue   86,000
  Sales Tax Payable   6,880 (1)
  (To record the sale of inventory for cash)    

Table (3)

Working Notes:

Calculate the amount of sales tax payable.

Sales revenue = $86,000

Sales tax percentage = 8%

Sales tax payable = (Sales×Sales tax percentage)=(Sales×6%)($86,000×8%)= $6,880 (1)

Calculate the amount of cash received.

Sales revenue = $86,000

Sales tax payable = $6,880 (1)

Cash received = (Sales+Sales tax payable)=$86,000+$6,880= $92,880 (2)

Explanation

  • Cash is an asset and it is increased by $92,880. Therefore, debit cash account with $92,880.
  • Sales revenue is revenue and it increases the value of equity by $86,000. Therefore, credit sales revenue with $86,000.
  • Sales tax payable is a liability and it is increased by $6,880. Therefore, credit sales tax payable account with $6,880.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
July 2 Cost of  Sold 51,600  
   Inventory   51,600
  (To record the cost of goods sold)    

Table (4)

Explanation

  • Cost of  sold is an expense account and it decreases the value of equity by $51,600. Therefore, debit cost of  sold account with $51,600.
  • Inventory is an asset and it is decreased by $51,600. Therefore, credit inventory account with $51,600.

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

Date Accounts and Explanation Debit ($) Credit ($)
July 5 Accounts receivable 17,325 (3)  
                Sales Revenue   17,325
  (To record the sale of inventory on account)    

Table (5)

Working Note:

Calculate the amount of accounts receivable.

Sales = $17,500

Discount percentage = 1%

Amount of accounts receivable} = (SalesDiscount)=Sales(Sales×1%)= $17,500 – ($17,500×1%)= $17,500$175=$17,325 (3)

Explanation

  • Accounts Receivable is an asset and it is increased by $17,325. Therefore, debit accounts receivable with $17,325.
  • Sales revenue is revenue and it increases the value of equity by $17,325. Therefore, credit sales revenue with $17,325.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
July 5 Cost of  Sold 10,000  
   Inventory   10,000
  (To record the cost of goods sold)    

Table (6)

Explanation

  • Cost of  sold is an expense account and it decreases the value of equity by $10,000. Therefore, debit cost of  sold account with $10,000.
  • Inventory is an asset and it is decreased by $10,000. Therefore, credit inventory account with $10,000.

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

Date Accounts and Explanation Debit ($) Credit ($)
July 8 Cash 120,960 (5)  
  Sales Revenue   112,000
  Sales Tax Payable   8,960 (4)
  (To record the sale of inventory for cash)    

Table (7)

Working Notes:

Calculate the amount of sales tax payable.

Sales revenue = $112,000

Sales tax percentage = 8%

Sales tax payable = (Sales×Sales tax percentage)=(Sales×6%)($112,000×8%)= $8,960 (4)

Calculate the amount of cash received.

Sales revenue = $112,000

Sales tax payable = $8,960 (4)

Cash received = (Sales+Sales tax payable)=$112,000+$8,960= $120,960 (5)

Explanation

  • Cash is an asset and it is increased by $120,960. Therefore, debit cash account with $120,960.
  • Sales revenue is revenue and it increases the value of equity by $112,000. Therefore, credit sales revenue with $112,000.
  • Sales tax payable is a liability and it is increased by $8,960. Therefore, credit sales tax payable account with $8,960.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
July 8 Cost of  Sold 67,200  
   Inventory   67,200
  (To record the cost of goods sold)    

Table (8)

Explanation

  • Cost of  sold is an expense account and it decreases the value of equity by $67,200. Therefore, debit cost of  sold account with $67,200.
  • Inventory is an asset and it is decreased by $67,200. Therefore, credit inventory account with $67,200.

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

Date Accounts and Explanation Debit ($) Credit ($)
July 13 Cash 96,000  
  Sales Revenue   96,000
  (To record the sale of inventory for cash)    

Table (9)

Explanation

  • Cash is an asset and it is increased by $96,000. Therefore, debit cash account with $96,000.
  • Sales revenue is revenue and it increases the value of equity by $96,000. Therefore, credit sales revenue with $96,000.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
July 13 Cost of  Sold 57,600  
   Inventory   57,600
  (To record the cost of goods sold)    

Table (10)

Explanation

  • Cost of  sold is an expense account and it decreases the value of equity by $57,600. Therefore, debit cost of  sold account with $57,600.
  • Inventory is an asset and it is decreased by $57,600. Therefore, credit inventory account with $57,600.

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

Date Accounts and Explanation Debit ($) Credit ($)
July 14 Accounts receivable 15,840 (6)  
                Sales Revenue   15,840
  (To record the sale of inventory on account)    

Table (11)

Working Note:

Calculate the amount of accounts receivable.

Sales = $16,000

Discount percentage = 1%

Amount of accounts receivable} = (SalesDiscount)=Sales(Sales×1%)= $16,000 – ($16,000×1%)= $16,000$160=$15,840 (6)

Explanation

  • Accounts Receivable is an asset and it is increased by $15,840. Therefore, debit accounts receivable with $15,840.
  • Sales revenue is revenue and it increases the value of equity by $15,840. Therefore, credit sales revenue with $15,840.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
July 14 Cost of  Sold 9,000  
   Inventory   9,000
  (To record the cost of goods sold)    

Table (12)

Explanation

  • Cost of  sold is an expense account and it decreases the value of equity by $9,000. Therefore, debit cost of  sold account with $9,000.
  •  Inventory is an asset and it is decreased by $9,000. Therefore, credit inventory account with $9,000.

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

Date Accounts and Explanation Debit ($) Credit ($)
July 15 Cash 17,325  
  Accounts Receivable   17,325
  (To record the receipt of cash against accounts receivables)    

Table (13)

Explanation

  • Cash is an asset and it is increased by $17,325. Therefore, debit cash account with $17,325.
  • Accounts Receivable is an asset and it is increased by $17,325. Therefore, debit accounts receivable with $17,325.

Record the journal entry for sales return.

Date Account Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

July 16 Customer Refunds Payable   2,970 (7)  
          Accounts Receivable     2,970
  (To record sales returns)      

Table (14)

Calculate the amount of refund owed to the customer.

Sales return = $3,000

Discount percentage = 1%

Amount of refund owed to customer = SalesReturnDiscount=Salesreturn(Salesreturn×discount)= $3,000($3,000×1%)=$3,000$30=$2,970 (7)

Explanation:

  • Customer refunds payable is a liability account and it is decreased by $2,970. Therefore, debit customer refunds payable account with $2,970.
  • Accounts Receivable is an asset and it is decreased by $2,970. Therefore, credit account receivable with $2,970.

Record the journal entry for the return of the .

Date Accounts and Explanation Debit ($) Credit ($)
July 16  Inventory 1,800  
  Estimated Returns Inventory   1,800
  (To record the return of the )    

Table (15)

Explanation

  •  Inventory is an asset and it is increased by $1,800. Therefore, debit inventory account with $1,800.
  • Estimated retunrs inventory is an expense account and it increases the value of equity by $1,800. Therefore, credit estimated returns inventory account with $1,800.

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

Date Accounts and Explanation Debit ($) Credit ($)
July 18 Accounts receivable 11,123 (8)  
                Sales Revenue   11,123
  (To record the sale of inventory on account)    

Table (16)

Working Note:

Calculate the amount of accounts receivable.

Sales = $11,350

Discount percentage = 2%

Amount of accounts receivable} = (SalesDiscount)=Sales(Sales×2%)= $11,350 – ($11,350×2%)= $11,350$227=$11,123 (8)

Explanation

  • Accounts Receivable is an asset and it is increased by $11,123. Therefore, debit accounts receivable with $11,123.
  • Sales revenue is revenue and it increases the value of equity by $11,123. Therefore, credit sales revenue with $11,123.

Record the journal entry.

Date Account Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

July 18 Accounts Receivable   475  
  Cash     475
  (To record freight charges paid)      

Table (17)

Explanation:

  • Accounts Receivable is an asset and it is increased by $475. Therefore, debit accounts receivable with $475.
  • Cash is an asset and it is decreased by $475. Therefore, credit cash account with $475.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
July 18 Cost of  Sold 6,800  
   Inventory   6,800
  (To record the cost of goods sold)    

Table (18)

Explanation

  • Cost of  sold is an expense account and it decreases the value of equity by $6,800. Therefore, debit cost of  sold account with $6,800.
  •  Inventory is an asset and it is decreased by $6,800. Therefore, credit inventory account with $6,800.

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

Date Accounts and Explanation

Debit

($)

Credit ($)
July 24 Cash 12,870 (9)  
  Accounts Receivable   12,870
  (To record the receipt of cash against accounts receivables)    

Table (19)

Calculate the amount of cash received.

Net accounts receivable = $15,840

Customer refunds payable = $2,970

Amount of cash received} = Net accounts receivableCustomer refunds payable= $15,840$2,970=$12,870 (9)

Explanation

  • Cash is an asset and it is increased by $12,870. Therefore, debit cash account with $12,870.
  • Accounts Receivable is an asset and it is increased by $12,870. Therefore, debit accounts receivable with $12,870.

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

Date Accounts and Explanation

Debit

($)

Credit ($)
July 28 Cash 11,598 (10)  
  Accounts Receivable   11,598
  (To record the receipt of cash against accounts receivables)    

Table (20)

Calculate the amount of cash received.

Net accounts receivable = $11,123

Freight charges = $475

Amount of cash received} = Net accounts receivable+Freight charges= $11,123+$475=$11,598 (10)

Explanation

  • Cash is an asset and it is increased by $11,598. Therefore, debit cash account with $11,598.
  • Accounts Receivable is an asset and it is increased by $11,598. Therefore, debit accounts receivable with $11,598.

Record the journal entry for delivery expense.

Date Accounts and Explanation Debit ($) Credit ($)
July 31 Delivery expense 8,550  
  Cash   8,550
  (To record the payment of delivery expenses)    

Table (21)

Explanation

  • Delivery expense is an expense account and it decreases the value of equity by $8,550. Therefore, debit delivery expense account with $8,550.
  • Cash is an asset and it is decreased by $8,550. Therefore, credit cash account with $8,550.

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

Date Accounts and Explanation

Debit

($)

Credit ($)
July 31 Cash 33,450  
  Accounts Receivable   33,450
  (To record the receipt of cash against accounts receivables)    

Table (22)

Explanation

  • Cash is an asset and it is increased by $33,450. Therefore, debit cash account with $33,450.
  • Accounts Receivable is an asset and it is increased by $33,450. Therefore, debit accounts receivable with $33,450.

Record the journal entry for credit card expense.

Date Accounts and Explanation Debit ($) Credit ($)
August 3 Credit card expense 3,770  
  Cash   3,770
  (To record the payment of credit card expenses)    

Table (23)

Explanation

  • Credit card expense is an expense account and it decreases the value of equity by $3,770. Therefore, debit credit card expense account with $3,770.
  • Cash is an asset and it is decreased by $3,770. Therefore, credit cash account with $3,770.

Record the journal entry for credit card expense.

Date Accounts and Explanation Debit ($) Credit ($)
August 10 Sales tax payable 41,260  
  Cash   41,260
  (To record the payment of credit card expenses)    

Table (24)

Explanation

  • Sales tax payable is a liability account and it is decreased by $41,260. Therefore, debit customer refunds payable account with $41,260.
  • Cash is an asset and it is decreased by $41,260. Therefore, credit cash account with $41,260

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Chapter 5 Solutions

Corporate Financial Accounting

Ch. 5 - Gross profit During the current year, merchandise...Ch. 5 - Purchases transactions Hoffman Company purchased...Ch. 5 - Prob. 5.3BECh. 5 - Prob. 5.4BECh. 5 - Prob. 5.5BECh. 5 - Prob. 5.6BECh. 5 - Determining gross profit During the current year,...Ch. 5 - Prob. 5.2EXCh. 5 - Prob. 5.3EXCh. 5 - Purchase-related transactions A retailer is...Ch. 5 - Purchase-related transactions The debits and...Ch. 5 - Prob. 5.6EXCh. 5 - Purchase-related transactions Journalize entries...Ch. 5 - Prob. 5.8EXCh. 5 - Customer refund Senger Company sold merchandise of...Ch. 5 - Prob. 5.10EXCh. 5 - Sales-related transactions After the amount due on...Ch. 5 - Prob. 5.12EXCh. 5 - Prob. 5.13EXCh. 5 - Determining amounts to be paid on invoices...Ch. 5 - Prob. 5.15EXCh. 5 - Purchase-related transactions Based on the data...Ch. 5 - Prob. 5.17EXCh. 5 - Prob. 5.18EXCh. 5 - Prob. 5.19EXCh. 5 - Normal balances of merchandise accounts What is...Ch. 5 - Income statement and accounts for merchandiser For...Ch. 5 - Income statement for merchandiser The following...Ch. 5 - Determining amounts for items omitted from income...Ch. 5 - Multiple-step income statement On March 31, 2018,...Ch. 5 - Multiple-step income statement The following...Ch. 5 - Prob. 5.26EXCh. 5 - Adjusting entry for customer refunds, allowances,...Ch. 5 - Prob. 5.28EXCh. 5 - Adjusting entry for inventory shrinkage Omega Tire...Ch. 5 - Prob. 5.30EXCh. 5 - Closing entries; net income Based on the data...Ch. 5 - Closing entries On July 31, the close of the...Ch. 5 - Rules of debit and credit for periodic inventory...Ch. 5 - Journal entries using the periodic inventory...Ch. 5 - Identify items missing in determining cost of...Ch. 5 - Cost of goods sold and related items The following...Ch. 5 - Cost of goods sold Based on the following data,...Ch. 5 - Cost of goods sold Based on the following data,...Ch. 5 - Prob. 5.39EXCh. 5 - Closing entries using periodic inventory system...Ch. 5 - Purchase-related transactions using perpetual...Ch. 5 - Sales-related transactions using perpetual...Ch. 5 - Sales-related and purchase-related transactions...Ch. 5 - Sales-related and purchase-related transactions...Ch. 5 - Multiple-step income statement and balance sheet...Ch. 5 - Single-step income statement and balance sheet...Ch. 5 - Prob. 5.7APRCh. 5 - Appendix Sales-related and purchase-related...Ch. 5 - Appendix Sales-related and purchase-related...Ch. 5 - Prob. 5.10APRCh. 5 - Purchase-related transactions using perpetual...Ch. 5 - Sales-related transactions using perpetual...Ch. 5 - Sales-related and purchase-related transactions...Ch. 5 - Sales-related and purchase-related transactions...Ch. 5 - Multiple-step income statement and balance sheet...Ch. 5 - Prob. 5.6BPRCh. 5 - Prob. 5.7BPRCh. 5 - Prob. 5.8BPRCh. 5 - Prob. 5.9BPRCh. 5 - Appendix Periodic inventory accounts,...Ch. 5 - Palisade Creek Co. is a merchandising business...Ch. 5 - Continuing Company Analysis-Amazon: Asset turnover...Ch. 5 - Home Depot: Asset turnover ratio The Home Depot...Ch. 5 - Kroger: Asset turnover ratio The Kroger Company, a...Ch. 5 - J. C. Penney: Asset turnover ratio J. C. Penney...Ch. 5 - Prob. 5.1TIFCh. 5 - Communication Suzi Nomro operates Watercraft...
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