Sales-Related and Purchase-Related Transactions Using Perpetual Inventory System

Question

Sales-Related and Purchase-Related Transactions Using Perpetual Inventory System

The following were selected from among the transactions completed by Babcock Company during November of the current year:

Required:

Journalize the transactions.

Nov. 3. Purchased merchandise on account from Moonlight Co., list price $88,000, trade discount 20%, terms FOB destination, 2/10, n/30. 4. Sold merchandise for cash, $38,350. The cost of the goods sold was $22,460. 5. Purchased merchandise on account from Papoose Creek Co., $43,500, terms FOB shipping point, 2/10, n/30, with prepaid freight of $860 added to the invoice. 6. Returned $13,600 ($17,000 list price less trade discount of 20%) of merchandise purchased on November 3 from Moonlight Co. 8. Sold merchandise on account to Quinn Co., $15,990 with terms n/15. The cost of the merchandise sold was $9,250. 13. Paid Moonlight Co. on account for purchase of November 3, less return of November 6. 14. Sold merchandise on VISA, $244,530. The cost of the goods sold was $143,910. 15. Paid Papoose Creek Co. on account for purchase of November 5. 23. Received cash on account from sale of November 8 to Quinn Co. 24. Sold merchandise on account to Rabel Co., $53,200, terms 1/10, n/30. The cost of the goods sold was $33,820. 28. Paid VISA service fee of $3,660. 30. Paid Quinn Co. a cash refund of $6,110 for returned merchandise from sale of November 8. The cost of the returned merchandise was $3,450.

Explanation / Answer

Journal Entries for the month of November are shown as follows:-

Journal Entries (Amount in $)

Date Account Titles Debit Credit Nov. 3 Inventory [$88,000 - (20%*$88,000)] 70,400 Accounts Payable-Moonlight Co. 70,400 Nov. 4-sale Cash 38,350 Sales Revenue 38,350 Nov. 4-cost Cost of goods sold 22,460 Inventory Nov. 5 Inventory ($43,500+$860) 44,360 Accounts Payable-Papoose Creek Co. 44,360 Nov. 6 Accounts Payable-Moonlight Co. 13,600 Inventory 13,600 Nov. 8-Sale Accounts Receivable-Quinn Co. 15,990 Sales Revenue 15,990 Nov. 8-Cost Cost of goods sold 9,250 Inventory 9,250 Nov. 13 Accounts Payable-Moonlight Co. (70,400-13,600) 56,800 Inventory (56,800*2%) 1,136 Cash (56,800 - 1,136) 55,664 Nov. 14-Sale Cash 244,530 Sales 244,530 Nov. 14-Cost Cost of goods sold 143,910 Inventory 143,910 Nov. 15 Accounts Payable-Papoose Creek Co. 44,360 Inventory ($43,500*2%) 870 Cash ($44,360-$870) 43,490 Nov. 23 Cash 15,990 Accounts Receivable-Quinn Co. 15,990 Nov. 24-Sale Accounts Receivable-Rabel Co. 53,200 Sales Revenue 53,200 Nov. 24-Cost Cost of goods sold 33,820 Inventory 33,820 Nov. 28 Credit card expense 3,660 Cash 3,660 Nov. 30-Refund Sales Returns and Allowances 6,110 Cash 6,110 Nov. 30-Cost Inventory 3,450 Cost of goods sold 3,450

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