1) Prepare journal entries to record the following merchandising transactions of

Question

1) Prepare journal entries to record the following merchandising transactions of Margin Company, which applies the perpetual inventory system and the gross method of recording invoices. Margin Company offers all of its credit customers credit terms of 2/10, n/30. May 1 Purchased merchandise from Craft Company for $7,800 under credit terms of 1/10, n/30, FOB shipping point, invoice dated May 1 Purchased merchandise from Bow Company for $10,600 under credit terms 2/05, n/20, FOB destination. May 2 May 3 Sold merchandise to Sting Company for S5.600, FOB shipping point, invoice dated May 4. The merchandise had cost $3,000 Paid $300 cash for the freight charges on the May I purchase of merchandise. May 4 May 5 Received an $800 credit memorandum from Craft Company for the return of part of the merchandise purchased on May1 May__ Paid Bow-onpanythe baTancedue within the discount period. May 8 Sold merchandise to Skeet Company tor $3,300, FOB shipping point, invoice dated May 8. The merchandise had a cost of $1,500 May 11 Paid Craft Company the balance due within the discount period May 13 Receivedthebalance duefrom Sting ( ompanywithinthe discount period May 14 Issued a credit $300 credit memorandum to Skeet Company for an allowanc - on defective merchandise May 17 Received the balance due from Skeet Company withi d nthe discount perio

Explanation / Answer

Journal enties in the books of Margin Company Date Accounting Titles Explanation Debit Credit May-1 Merchandise Inventory $7,800              Accounts Payable $7,800 Being purchase of merchandise from Craft Company on credit terms of 1/10, n/30) May-2 Merchandise Inventory $10,600              Accounts Payable $10,600 Being purchase of merchandise from Bow Co. on credit terms of 2/05, n/20) May-4 Accounts Receivable $5,600             Sales $5,600 (Being goods sold to Sting Co) ,, Cost of goods sold $3,000               Merchandise Inventory $3,000 (Being inventory reduced) May-4 Freight Inward $300             Cash $300 (Being freight charges paid on purchase of merchandise) May-5 Accounts Payable $800               Merchandise Inventory $800 Being purchase return made to Craft Company) May-6 Accounts Payable $10,600               Merchandise Inventory $212                 Cash $10,388 (Being cash paid to Bow Co. on discount terms) May-8 Accounts Receivable $3,300             Sales $3,300 (Being goods sold to Skeet Co.) ,, Cost of goods sold $1,500               Merchandise Inventory $1,500 (Being inventory reduced) May-11 Accounts Payable $7,000               Merchandise Inventory $70                 Cash $6,930 (Being cash paid to Bow Co. on discount terms) May-13 Cash $5,488 Sales Discount $112                   Accounts Receivable $5,600 (Being cash received from Sting Co within credit terms) May-14 Sales Retun $300             Accounts Receivable $300 (Being credit note issued to Skeet Co. for defective material) ,, Merchandise Inventory $136 ($300*$1500/$3300)               Cost of goods sold $136 (Being inventory reduced) May-17 Cash $2,940 Sales Discount $60                   Accounts Receivable $3,000 (Being cash received from Skeet Co. within credit terms)

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