Nicole\'s Getaway Spa (NGS) has been so successful that Nicole has decided to ex
ID: 2419400 • Letter: N
Question
Nicole's Getaway Spa (NGS) has been so successful that Nicole has decided to expand her spa by selling merchandise. She sells things such as nail polish, at-home spa kits, cosmetics, and aromatherapy items. Nicole uses a perpetual inventory system and is starting to realize all of the work that is created when inventory is involved in a business. The following transactions were selected from among those completed by NGS in August
Sold 10 items of merchandise to Salon World on account at a selling price of $2,500 (total); terms 2/10, n/30. The goods cost NGS $1,625.
Sold 5 identical items of merchandise to Cosmetics R Us on account at a selling price of $1,400 (total); terms 2/10, n/30. The goods cost NGS $1,120.
Cosmetics R Us returned one of the items purchased on August 3. The item could still be sold by NGS in the future, and credit was given to the customer.
Collected payment from Salon World, fully paying off the account balance.
Sold two at-home spa kits to Meghan Witzel for $600 cash. The goods cost NGS $192.
1. Prepare journal entries for each transaction
2 Calculate the amount of Net Sales and Cost of Goods Sold for the transactions listed above.
Nicole's Getaway Spa (NGS) has been so successful that Nicole has decided to expand her spa by selling merchandise. She sells things such as nail polish, at-home spa kits, cosmetics, and aromatherapy items. Nicole uses a perpetual inventory system and is starting to realize all of the work that is created when inventory is involved in a business. The following transactions were selected from among those completed by NGS in August
Explanation / Answer
Answer to Part 1:
Journal Entries for the month of August:
Date
Particulars
Debit
Credit
Aug 2
Salon World a/c Dr
To Sales a/c
[Sold items of merchandise to Salon World on account]
$2500
$2500
Aug 3
Cosmetics R Us a/c Dr
To Sales a/c
[Sold items of merchandise to Cosmetics R Us on account]
$1400
$1400
Aug 6
Sales Returns a/c (1400 / 5) Dr
To Cosmetics R Us a/c
[One of the items returned by Cosmetics R Us]
$280
$280
Aug 10
Cash a/c (2500 (1-0.02)) Dr
Discount a/c (2500 * 0.02) Dr
To Salon World a/c
[Collected Payment from Salon world after allowing discount of 2% since paid within 10 days ]
$2450
$50
$2500
Aug 20
Cash a/c Dr
To Sales a/c
[Sales made to Meghan Witzel]
$600
$600
Aug 22
Cash a/c Dr
To Cosmetics R Us a/c
[Collected Payment from Cosmetics R Us]
$1120
$1120
Answer to Part 2:
Calculation of amount of net Sales and Cost of Goods Sold:
Salon World:
Net Sales = Sales – Discount
= $2500 – ($2500 * 0.02)
= $2500 - $50
= $2450
Cost of Goods Sold = $1625
Cosmetics R Us:
Net Sales = Sales – Sales Returns
= $1400 – ($1400 / 5)
= $1400 - $280
= $1120
Cost of Goods Sold
= $1120 – ($1120 * 1/5)
= $1120 - $224
= $896
Meghan Witzel:
Net Sales = $600
Cost of Goods Sold = $192
Date
Particulars
Debit
Credit
Aug 2
Salon World a/c Dr
To Sales a/c
[Sold items of merchandise to Salon World on account]
$2500
$2500
Aug 3
Cosmetics R Us a/c Dr
To Sales a/c
[Sold items of merchandise to Cosmetics R Us on account]
$1400
$1400
Aug 6
Sales Returns a/c (1400 / 5) Dr
To Cosmetics R Us a/c
[One of the items returned by Cosmetics R Us]
$280
$280
Aug 10
Cash a/c (2500 (1-0.02)) Dr
Discount a/c (2500 * 0.02) Dr
To Salon World a/c
[Collected Payment from Salon world after allowing discount of 2% since paid within 10 days ]
$2450
$50
$2500
Aug 20
Cash a/c Dr
To Sales a/c
[Sales made to Meghan Witzel]
$600
$600
Aug 22
Cash a/c Dr
To Cosmetics R Us a/c
[Collected Payment from Cosmetics R Us]
$1120
$1120
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