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Cornerstones of Financial Accounti...
Solutions
Cornerstones of Financial Accounti...
Use the following information for Cornerstone Exercises 6-20 and 6-21:
Mathis Company and Reece Company use the perpetual inventory system. The following transactions occurred during the month of April:
a. On April 1, Mathis purchased merchandise on account from Reece with credit terms of 2/10, n/30. The selling price of the merchandise was $3,100, and the cost of the merchandise sold was $2,225.
b. On April 1, Mathis paid freight charges of S250 cash to have the goods delivered to its warehouse.
c. On April 8, Mathis returned $800 of the merchandise which had originally cost Reece $500.
d. On April 10, Mathis paid Reece the balance due.
Recording Sales Transactions
Refer to the information for Mathis and Reece companies on the previous page.
Required:
Prepare the journal entries to record these transactions on Reece’s books. Assume that Reece uses the net method to record sales on account and no sales returns are expected.
Concept introduction:
Perpetual Inventory System:
The perpetual inventory system records and updates the inventory after each and every transaction. The inventory balance is updated after each transaction and it is kept up to date at every time.
To prepare:
The Journal entry to record the transactions in the book of Reece Company.
The Journal entries to record the transactions in the book of Reece Company are explained as follows:
| Reece Company | |||
| Journal Entries | |||
| Perpetual Inventory System | |||
| Date | Account Title | Debit | Credit |
| Apr. 1 | Accounts Receivable (3100-3100*2%) | $ 3,038 | |
| Sales Revenue | $ 3,038 | ||
| (Being Sales made on account) | |||
| Cost of Goods Sold | $ 2,225 | ||
| Merchandise Inventory | $ 2,225 | ||
| (Being merchandise sold) | |||
| Apr... | |||
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