Concept explainers
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 $41,260 to state sales tax division for taxes owed on sales. |
Instructions
Sales is an activity of selling the inventory of a business.
To Record: The sale transactions of the company.
Answer to Problem 5.2BPR
Record the journal entry for the sale of inventory on account.
Date | Accounts and Explanation | Debit ($) | 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%
Calculate the amount of cash received.
Sales revenue = $86,000
Sales tax payable = $6,880 (1)
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%
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%
Calculate the amount of cash received.
Sales revenue = $112,000
Sales tax payable = $8,960 (4)
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%
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%
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%
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
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
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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