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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Sales-related transactions

The debits and credits for four related entries for a .sale of $15,000, terms 1/10, n/30, are presented in the following T accounts. Describe each transaction.

Cash Sales
(5) 13,860     (1) 14,850
Accounts Receivable Cost Of Merchandise Sold
(1) 14,850 (3) 990 (2) 8,800  
  (5) 13,860    
Merchandise Inventory    
  (4) 8,800    
Estimated Returns Inventory    
  (4) 575    
Customer Refunds Payable    
(3) 990      

To determine

Sales is an activity of selling the merchandise inventory of a business.

To Describe: The sale of merchandise inventory on account under the terms of 1/10, n/30.

Explanation

(1)

Describe the sale of merchandise inventory on account.

Date Accounts and Explanation Debit ($) Credit ($)
  Accounts Receivable 14,850  
  To Sales Revenue   14,850
  (To record the sale of inventory on account)    

Table (1)

Explanation

  • Accounts Receivable is an asset and it is increased by $14,850. Therefore, debit accounts receivable with $14,850.
  • Sales revenue is revenue and it increases the value of equity by $14,850. Therefore, credit sales revenue with $14,850.

(2)

Describe the entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
  Cost of Merchandise Sold 8,800  
  Merchandise Inventory   8,800
  (To record the cost of goods sold)    

Table (2)

Explanation

  • Cost of merchandise sold is an expense account and it decreases the value of equity by $8,800. Therefore, debit cost of merchandise sold account with $8,800.
  • Merchandise Inventory is an asset and it is decreased by $8,800. Therefore, credit inventory account with $8,800.

(3)

Describe the journal entry for sales return.

Date Account Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

  Customer Refunds Payable   990  
          Accounts Receivable     990
  (To record sales returns)      

Table (3)

Explanation:

  • Customer refunds payable is a liability account and decreased by $990...

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