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: 9781305500143

Author: WARREN

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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Cengagenow For Financial Accounting

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