Explanation Record the purchase of merchandise inventory on account. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) January 4 Merchandise Inventory 5,000 Accounts Payable 5,000 (To record purchases of inventory on account) Table (1) Merchandise inventory is an asset and it is increased by $5,000. Therefore, debit inventory account with $5,000. Accounts payable is a liability and it is increased by $5,000. Therefore, credit accounts payable account with $5,000. Record the journal entry for freight charges paid. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) January 6 Merchandise Inventory 150 Cash 150 (To record the payment of freight charges) Table (2) Merchandise Inventory is an asset and it is increased by $150. Therefore, debit inventory account with $150. Cash is an asset and it is decreased by $150. Therefore, credit cash account with $150. Record the journal entry for purchase returned. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) January 8 Accounts Payable 2,500 Merchandise Inventory 2,500 (To record the purchases return) Table (3) Working Note: Merchandise inventory = $5,000 Merchandise inventory returned = Merchandise inventory 2 = $ 5 , 000 2 = $ 2 , 500 Accounts payable is a liability and it is decreased by $2,500. Therefore, debit accounts payable account with $2,500. Inventory is an asset and it is decreased by $2,500. Therefore, credit inventory account with $2,500. Record the journal entry for the sale of inventory on cash. Date Accounts and Explanation Debit ($) Credit ($) January 10 Cash 1,100 Sales Revenue 1,100 (To record the sale of inventory on cash) Table (4) Cash is an asset and it is increased by $1,100. Therefore, debit cash account with $1,100. Sales revenue is revenue and it increases the value of equity by $1,100. Therefore, credit sales revenue with $1,100. Record the journal entry for cost of goods sold. Date Accounts and Explanation Debit ($) Credit ($) January 10 Cost of Goods Sold 440 Merchandise Inventory 440 (To record the cost of goods sold) Table (5) Cost of goods sold is an expense account and it decreases the value of equity by $440. Therefore, debit cost of goods sold account with $440. Merchandise Inventory is an asset and it is decreased by $440. Therefore, credit inventory account with $440. Record the journal entry for the sale of inventory on account. Date Accounts and Explanation Debit ($) Credit ($) January 11 Accounts Receivable 10,100 Sales Revenue 10,100 (To record the sale of inventory on account) Table (6) Accounts Receivable is an asset and it is increased by $10,100. Therefore, debit account receivable with $10,100. Sales revenue is revenue and it increases the value of equity by $10,100. Therefore, credit sales revenue with $10,100. Record the journal entry for cost of goods sold. Date Accounts and Explanation Debit ($) Credit ($) January 11 Cost of Goods Sold 5,555 Merchandise Inventory 5,555 (To record the cost of goods sold) Table (7) Cost of goods sold is an expense account and it decreases the value of equity by $5,555. Therefore, debit cost of goods sold account with $5,555. Merchandise Inventory is an asset and it is decreased by $5,555. Therefore, credit inventory account with $5,555. Record the journal entry for delivery charges paid. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) January 12 Delivery Expense 30 Cash 30 (To record the payment of delivery charges) Table (8) Delivery expense is an expense and it decreases the value of equity by $30. Therefore, debit delivery expense account with $30. Cash is an asset and it is decreased by $30. Therefore, credit cash account with $30. Record the journal entry for the sale of inventory on account. Date Accounts and Explanation Debit ($) Credit ($) January 13 Accounts Receivable 8,800 Sales Revenue 8,800 (To record the sale of inventory on account) Table (9) Accounts Receivable is an asset and it is increased by $8,800. Therefore, debit account receivable with $8,800. Sales revenue is revenue and it increases the value of equity by $8,800. Therefore, credit sales revenue with $8,800. Record the journal entry for cost of goods sold. Date Accounts and Explanation Debit ($) Credit ($) January 13 Cost of Goods Sold 4,400 Merchandise Inventory 4,400 (To record the cost of goods sold) Table (10) Cost of goods sold is an expense account and it decreases the value of equity by $4,400. Therefore, debit cost of goods sold account with $4,400. Merchandise Inventory is an asset and it is decreased by $4,400. Therefore, credit inventory account with $4,400. Record the journal entry for the due amount paid. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) January 14 Accounts Payable 2,500 (1) Merchandise Inventory 25 (2) Cash 2,475 (3) (To record paying cash on purchases after discounts and returns) Table (11) Working Notes: Calculate accounts payable amount. Inventory = $5,000 Inventory returns = $2,500 Accounts payable = Inventory – Inventory returns = $ 5 , 000 – $ 2 , 500 = $ 2 , 500 (1) Calculate purchase discount / inventory. Net accounts payable = $2,500 (1) Discount percentage = 1% Purchase discount = $2,500 × 1 100 = $25 (2) Calculate cash paid. Accounts payable = $2,500 (1) Purchase discount / Inventory = $25 (2) Cash paid = Accounts payable, net – Purchase discount = $2,500 – $25 = $2,475 (3) Accounts payable is a liability and it is decreased by $2,500. Therefore, debit accounts payable account with $2,500. Merchandise Inventory is an asset and it is decreased by $25. Therefore, credit inventory account with $25. Cash is an asset and it is decreased by $2,475. Therefore, credit cash account with $2,475. Record the journal entry for sales return. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) January 16 Sales Returns and Allowances 800 Accounts Receivable 800 (To record sales returns) Table (12) Sales return and allowance is an expense account and it decreases the value of equity by $800

16th Edition

ISBN: 9781323118047

Author: Pearson

Publisher: PEARSON C

See similar textbooks

Concept explainers

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…

Videos

Question

Chapter 5, Problem 5.39BP

To determine

Purchases is an activity of acquiring the merchandise inventory of a business.

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

To Record: The purchase and sales transactions of Company T during January 2016.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 5, Problem 5.38BP

Chapter 5, Problem 5.40BP

Students have asked these similar questions

Journalize the following transactions that occurred in September for Lemon Field, assuming the perpetual inventory system is being used. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. (Record debits first, then credits. Exclude explanations from journal entries. Assume the company records sales using the gross method.) View the transactions. ... Transactions Sep. 3: Purchased merchandise inventory on account from Sidecki Wholesalers, $4,400. Terms 2/15, n/EOM, FOB shipping point. Sep. 3 Date Accounts Debit Credit Sep. 4 Purchased merchandise inventory on account from Sidecki Wholesalers, $4,400. Terms 2/15, n/EOM, FOB shipping point. Paid freight bill of $55 on September 3 purchase. Sep. 3 Sep. 4 Purchase merchandise inventory for cash of $2,000. Sep. 6 Sep. 8 Returned $500 of inventory from September 3 purchase. Sep. 9 Sep. 10 Sep. 12 Sep. 13 Sold merchandise inventory to Duluth Company, $5,600, on account. Terms…

Recording Purchases Dawson Enterprises, uses the perpetual system to record inventory transactions. Dawson had the following transactions in April: a. On April 1, Dawson purchased merchandise on credit for $21,900 with terms 2/10, n/30. b. On April 2, Dawson purchased merchandise on credit for $24,900 with terms 3/15, n/25. c. On April 9, Dawson paid for the purchase made on April 1. d. On April 25, Dawson paid for the merchandise purchased on April 2. Required: Prepare journal entries for these four transactions. If an amount box does not require an entry, leave it blank. April 1 Purchases 88 April 2 April 9 April 25 00 00000

Journalize the following transactions that occurred in November 2018 for Sarah’s Special Place, assuming the perpetual inventory system is being used. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Sarah’s Special Place estimates sales returns at the end of each month. Proper narrations are required

Chapter 5 Solutions

ACC 201/202 MYACCLAB E-TEXT ONLY >I<

Ch. 5 - Which account does a merchandiser use that a...Ch. 5 - The two main inventory accounting systems are the...Ch. 5 - The journal entry for the purchase of inventory on...Ch. 5 - JC Manufacturing purchase d inventory for 5,300...Ch. 5 - Prob. 5QC Ch. 5 - Suppose Daves Discounts Merchandise Inventory...Ch. 5 - Which of the following accounts would be closed at...Ch. 5 - What is the order of the subtotals that appear on...Ch. 5 - Prob. 9QC Ch. 5 - The journal entry for the purchase of inventory on...

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Purchases is an activity of acquiring the merchandise inventory of a business. Sales is an activity of selling the merchandise inventory of a business. To Record: The purchase and sales transactions of Company T during January 2016.

Solution Summary: The author explains how to record the purchase and sales transactions of Company T during January 2016.