3) Preparing journal entries for purchases & sales transactions. (16 Points-2 pt

Question

3) Preparing journal entries for purchases & sales transactions. (16 Points-2 pts. each) On March 08, 2017, Boss Tunes bought 80 stereo systems to resell at a cost of $90 per stereo. The terms of the purchase were 3/10, n30. Boss Tunes paid for the stereos within the discount period and pakd in full, less the discount anount. On March 12, 2017, BossTunes sold 22 stereos to Cool Beans Co. (customer) for a total of S3,300, subject to terms 2/15, n45. Note: BossTunes uses the gross me thod of accounting for sales discounts. BossTunes uses the perpetual inventory system. Some lines may not be needed to make journal entries. Ressiredi 1. Prepare the journal entry (/E) to record the purchase on account. 2. Cakulkte the amount of the purchase discount, assuning that BossTunes pays within the discount period. 3. Prepare the JE to record the payment of the stcreos, inckding taking the purchase discount. 4. Prepare the /E to record the sale on account 5. Cakubte the amount of the sales discount. Assume BossTunes' customer pays within the discount period. 6. Prepare the J/E to record receipt of the payment (assume the customer is eligibke for the discount). 7. Prepare the J/E assuming that the customer retums one of the stereos for a cash refund (don't forget to deduct the discount aready given to the customer). &. What is the gross proft afer the above transactions are made? Use the account numbers in the back of this test for the journal entries below. Account # Dcbit Amount Credit Amount 1. Account to Debit: Account to Credit: 2. 3. Account to Debit: Account to Debit: Account to Credit: Account to Credit: 4. Account to Debit: Account to Debit: Account to Credit: Account to Credit: 5, Account to Debit: Account to Debit: Account to Credit: Account to Credit: Account to Debit: Account to Debit: Account to Credit: Account to Credit: 6. 7. 8. Hint: Add up the credits and subtract the debits affecting net income.

Explanation / Answer

Gross profit:

SlNo Account # Debit amount Credit amount 1 Account to debit Inventory for resale 115 7200 Account to credit Accounts payable 211 7200 2 Amount of purchase discount= 7200*3%= 216 3 Account to debit Accounts payable 211 216 Account to credit Purchases discount507 216 Account to debit Accounts payable 211 6984 Account to credit Cash 101 6984 4 Account to debit Accounts receivable 111 3300 Account to credit Sales revenue 405 3300 Account to debit Cost of goods sold 505 1920.6 [22*87.3] Account to credit Inventory for resale 115 1920.6 5 Sales discount= 3300*2%= 66 6 Account to debit Cash 101 3234 Account to credit Accounts receivable 111 3234 Account to debit Sales discount 406 66 Account to credit Accounts receivable 111 66 7 Account to debit Inventory for resale 115 90 Account to credit Cost of goods sold 505 90 Account to debit Sales return 407 147 Account to credit Cash 101 147

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