Chapter 6, Problem 2PA

The following selected transactions were completed by Amsterdam Supply Co., which sells office supplies primarily to wholesalers and occasionally to retail customers:

Instructions

Journalize the entries to record the transactions of Amsterdam Supply Co.

To determine

Record the sale transactions of the company.

Explanation of Solution

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

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

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 2	Accounts receivable	18,711 (1)
	Sales Revenue		18,711
	(To record the sale of inventory on account)

Table (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.

Working Note (1):

Calculate the amount of accounts receivable.

Sales = $18,900

Discount percentage = 1%

  $\begin{array}{c}\text{Amount of accounts receivable}\}\text{ = }\left(\text{Sales}-\text{Discount}\right)\\ \text{=}\text{Sales}-\left(\text{Sales}\times 1\%\right)\\ \text{= \$18,900 – }\left(\$18,900\times 1\%\right)\\ \text{= \$18,900}-\$189\\ =\$18,711\end{array}$

Record the journal entry for cost of goods sold.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 2	Cost of Merchandise Sold	13,300
	Merchandise Inventory		13,300
	(To record the cost of goods sold)

Table (2)

• Cost of merchandise sold is an expense account and it decreases the value of equity by $13,300. Therefore, debit cost of merchandise sold account with $13,300.
• Merchandise 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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 3	Cash	12,031 (3)
	Sales Revenue		11,350
	Sales Tax Payable		681 (2)
	(To record the sale of inventory for cash)

Table (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.

Working Notes(2):

Calculate the amount of sales tax payable.

Sales revenue = $11,350

Sales tax percentage = 6%

  $\begin{array}{c}\text{Sales tax payable = }\left(\text{Sales}\times \text{Sales tax percentage}\right)\\ \text{=}\left(\text{Sales}\times 6\%\right)\\ \text{= }\left(\$11,350\times 6\%\right)\\ \text{= \$681}\end{array}$

Working Notes(3):

Calculate the amount of cash received.

Sales revenue = $11,350

Sales tax payable = $681 (2)

  $\begin{array}{c}\text{Cash received = }\left(\text{Sales}+\text{Sales tax payable}\right)\\ \text{=}\$11,350+\$681\\ \text{= \$12,031}\end{array}$

Record the journal entry for cost of goods sold.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 3	Cost of Merchandise Sold	7,000
	Merchandise Inventory		7,000
	(To record the cost of goods sold)

Table (4)

• Cost of merchandise sold is an expense account and it decreases the value of equity by $7,000. Therefore, debit cost of merchandise sold account with $7,000.
• Merchandise 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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 4	Accounts receivable	55,400
	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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 4	Cost of Merchandise Sold	33,200
	Merchandise Inventory		33,200
	(To record the cost of goods sold)

Table (6)

• Cost of merchandise sold is an expense account and it decreases the value of equity by $33,200. Therefore, debit cost of merchandise sold account with $33,200.
• Merchandise 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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 5	Cash	31,800 (5)
	Sales Revenue		30,000
	Sales Tax Payable		1,800 (4)
	(To record the sale of inventory for cash)

Table (7)

• 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.

Working Note (4):

Calculate the amount of sales tax payable.

Sales revenue = $30,000

Sales tax percentage = 6%

  $\begin{array}{c}\text{Sales tax payable = }\left(\text{Sales}\times \text{Sales tax percentage}\right)\\ \text{=}\left(\text{Sales}\times 6\%\right)\\ \text{= }\left(\$30,000\times 6\%\right)\\ \text{= \$1,800}\end{array}$

Working Note (5):

Calculate the amount of cash received.

Sales revenue = $30,000

Sales tax payable = $1,800 (2)

  $\begin{array}{c}\text{Cash received = }\left(\text{Sales}+\text{Sales tax payable}\right)\\ \text{=}\$30,000+\$1,800\\ \text{= \$31,800}\end{array}$

Record the journal entry for cost of goods sold.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 5	Cost of Merchandise Sold	19,400
	Merchandise Inventory		19,400
	(To record the cost of goods sold)

Table (8)

• Cost of merchandise sold is an expense account and it decreases the value of equity by $19,400. Therefore, debit cost of merchandise sold account with $19,400.
• Merchandise 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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 12	Cash	18,711
	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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 14	Cash	13,700
	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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 14	Cost of Merchandise Sold	8,350
	Merchandise Inventory		8,350
	(To record the cost of goods sold)

Table (11)

• Cost of merchandise sold is an expense account and it decreases the value of equity by $8,350. Therefore, debit cost of merchandise sold account with $8,350.
• Merchandise 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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 16	Accounts receivable	27,225 (6)
	Sales Revenue		27,225
	(To record the sale of inventory on account)

Table (12)

• 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.

Working Note (6):

Calculate the amount of accounts receivable.

Sales = $27,500

Discount percentage = 1%

  $\begin{array}{c}\text{Amount of accounts receivable}\}\text{ = }\left(\text{Sales}-\text{Discount}\right)\\ \text{=}\text{Sales}-\left(\text{Sales}\times 1\%\right)\\ \text{= \$27,500 – }\left(\$27,500\times 1\%\right)\\ \text{= \$27,500}-\$275\\ =\$27,225\end{array}$

Record the journal entry for cost of goods sold.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 16	Cost of Merchandise Sold	16,000
	Merchandise Inventory		16,000
	(To record the cost of goods sold)

Table (13)

• Cost of merchandise sold is an expense account and it decreases the value of equity by $16,000. Therefore, debit cost of merchandise sold account with $16,000.
• Merchandise 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.

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
March 18	Customer Refunds Payable		4,752 (7)
	Accounts Receivable			4,752
	(To record sales returns)

Table (14)

• 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.

Working Note (7):

Calculate the amount of refund owed to the customer.

Sales return = $4,800

Discount percentage = 1%

  $\begin{array}{c}\text{Amount of refund owed to customer = Sales}\text{Return}-\text{Discount}\\ =\text{Sales}\text{return}-\left(\text{Sales}\text{return}\times \text{discount}\right)\\ \text{= \$4,800}-\left(\$4,800\times 1\%\right)\\ =\$4,800-\$48\\ =\$4,752\end{array}$

Record the journal entry for the return of the merchandise.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 18	Merchandise Inventory	2,900
	Estimated Returns Inventory		2,900
	(To record the return of the merchandise)

Table (15)

• Merchandise 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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 19	Accounts receivable	8,085 (8)
	Sales Revenue		8,085
	(To record the sale of inventory on account)

Table (16)

• 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.

Working Note (8):

Calculate the amount of accounts receivable.

Sales = $8,250

Discount percentage = 2%

  $\begin{array}{c}\text{Amount of accounts receivable}\}\text{ = }\left(\text{Sales}-\text{Discount}\right)\\ \text{=}\text{Sales}-\left(\text{Sales}\times 2\%\right)\\ \text{= \$8,250 – }\left(\$8,250\times 2\%\right)\\ \text{= \$8,250}-\$165\\ =\$8,085\end{array}$

Record the journal entry.

Date	Account Title and Explanation	Post Ref.	Debit ($)	Credit ($)
March 19	Accounts 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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 19	Cost of Merchandise Sold	5,000
	Merchandise Inventory		5,000
	(To record the cost of goods sold)

Table (18)

• Cost of merchandise sold is an expense account and it decreases the value of equity by $5,000. Therefore, debit cost of merchandise sold account with $5,000.
• Merchandise 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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 26	Cash	22,473 (9)
	Accounts Receivable		22,473
	(To record the receipt of cash against accounts receivables)

Table (19)

• 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.

Working Note (9):

Calculate the amount of cash received.

Net accounts receivable = $22,473

Customer refunds payable = $4,752

  $\begin{array}{c}\text{Amount of cash received}\}\text{ = Net accounts receivable}-\text{Customer refunds payable}\\ \text{= \$27,225}-\$4,752\\ =\$22,473\end{array}$

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

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 28	Cash	8,160 (10)
	Accounts Receivable		8,160
	(To record the receipt of cash against accounts receivables)

Table (20)

• 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.

Working Note (10):

Calculate the amount of cash received.

Net accounts receivable = $8,085

Freight charges = $75

  $\begin{array}{c}\text{Amount of cash received}\}\text{ = Net accounts receivable}+\text{Freight charges}\\ \text{= \$8,085}+\$75\\ =\$8,160\end{array}$

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

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 31	Cash	55,400
	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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
March 31	Delivery expense	5,600
	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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
April 3	Credit card expense	940
	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.

Date	Accounts and Explanation	Debit ($)	Credit ($)
April 15	Sales tax payable	6,544
	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.