Explanation Purchases is an activity of acquiring the merchandise inventory of a business. 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 ($) Credit ($) Accounts Receivable 109,760 (1) To Sales 109,760 (To record the sale of inventory on account after discount) Table (1) Working Note 1: Calculate the amount of accounts receivable. Sales = $112,000 Discount Percentage = 2% Amount of accounts receivable } = Sales − Discount = Sales − ( Sales × 2 % ) = $112,000 – ( $ 112 , 000 × 2 % ) = $112,000 − $ 2 , 240 = $ 109 , 760 Accounts Receivable is an asset and it is increased by $109,760. Therefore, debit account receivable with $109,760. Sales is revenue and it increases the value of equity by $109,760. Therefore, credit sales with $109,760. Record the journal entry for cost of goods sold. Date Accounts and Explanation Debit ($) Credit ($) Cost of Merchandise Sold 67,200 Merchandise Inventory 67,200 (To record the cost of merchandise sold) Table (2) Cost of merchandise sold is an expense account and it decreases the value of equity by $67,200. Therefore, debit cost of merchandise sold account with $67,200. Merchandise Inventory is an asset and it is decreased by $67,200. Therefore, credit inventory account with $67,200. Record the journal entry for the freight paid by Company S on behalf of Company B. Date Accounts and Explanation Debit ($) Credit ($) Accounts Receivable 1,800 To Cash 1,800 (To record the payment of freight charges paid) Table (3) Accounts Receivable is an asset and it is increased by $1,800. Therefore, debit account receivable with $1,800. Cash is an asset and it is decreased by $1,800. Therefore, credit cash account with $1,800. Record the journal entry for the balance amount received. Date Account Title and Explanation Post Ref. Debit ($) Credit ($) Cash 111,560 (2) Accounts Receivable 111,560 (To record cash received with freight charges) Table (4) Working Note 2: Calculate the amount of cash received. Amount of accounts receivable for sales = $109,760 Amount of accounts receivable for freight charges = $1,800 Amount of cash received } = ( Amount of accounts receivable for sales + Amount of accounts receivable for freight charges ) = $109,760 + $ 1 , 800 = $ 111 , 560 Cash is an asset and it is increased by $111,560

14th Edition

ISBN: 9781305088436

Author: Carl Warren, Jim Reeve, Jonathan Duchac

Publisher: Cengage Learning

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Chapter 6, Problem 5PEB

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Record the sales transactions in the books of Company S.

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Chapter 6, Problem 5PEA

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Shore Co. sold merchandise to Blue Star Co. on account, $112,000, terms FOB shipping point, 2/10, n/30. The cost of the goods sold is $67,200. Shore Co. paid freight of $1,800. Journalize the entries for Shore and Blue Star for the sale, purchase, and payment of amount due. Refer to the appropriate company’s Chart of Accounts for exact wording of account titles. CHART OF ACCOUNTS Shore Co. General Ledger ASSETS 110 Cash 121 Accounts Receivable-Blue Star Co. 125 Notes Receivable 130 Inventory 140 Office Supplies 141 Store Supplies 142 Prepaid Insurance 180 Land 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 218 Sales Tax Payable 219 Customer Refunds Payable 220 Unearned Rent 221 Notes Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends 313 Income Summary…

Chapter 6 Solutions

Financial Accounting

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Record the sales transactions in the books of Company S.

Solution Summary: The author calculates the amount of accounts receivable, sales, revenue, and cost of goods sold in the books of Company S.

Record the sales transactions in the books of Company S.

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Chapter 6 Solutions