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Sales-related transactions Showcase Co., a furniture wholesaler, sells merchandise to Balboa Co. on account, $254,500, terms n/30. The cost of the merchandise sold is $152,700. Showcase Co. issues a credit memo for $30,000 for merchandise returned prior to Balboa Co. paying the original invoice. The cost of the merchandise returned is $17,500. Journalize Showcase Co.’s entries for (a) the sale, including the cost of the merchandise sold; (b) the credit memo, including the cost of the returned merchandise; and (c) the receipt of the chock for the amount due from Balboa Co.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 6, Problem 6.14EX
Textbook Problem

Sales-related transactions

Showcase Co., a furniture wholesaler, sells merchandise to Balboa Co. on account, $254,500, terms n/30. The cost of the merchandise sold is $152,700. Showcase Co. issues a credit memo for $30,000 for merchandise returned prior to Balboa Co. paying the original invoice. The cost of the merchandise returned is $17,500. Journalize Showcase Co.’s entries for (a) the sale, including the cost of the merchandise sold; (b) the credit memo, including the cost of the returned merchandise; and (c) the receipt of the chock for the amount due from Balboa Co.

Expert Solution
To determine

Journalize the given transactions for Corporation S.

Explanation of Solution

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

Transaction (a):

Record the sale of merchandise inventory on account.

DateAccounts and ExplanationDebit ($)Credit ($)
 Accounts Receivable254,500 
            Sales Revenue 254,500
 (To record the sale of inventory on account)  

Table (1)

  • Accounts Receivable is an asset and it is increased by $254,500. Therefore, debit accounts receivable with $254,500.
  • Sales revenue is revenue and it increases the value of equity by $254,500. Therefore, credit sales revenue with $254,500.

Record the entry for cost of goods sold.

DateAccounts and ExplanationDebit ($)Credit ($)
 Cost of Merchandise Sold152,700 
 Merchandise Inventory 152,700
 (To record the cost of goods sold)  

Table (2)

  • Cost of merchandise sold is an expense account and it decreases the value of equity by $152,700. Therefore, debit cost of merchandise sold account with $152,700.
  • Merchandise Inventory is an asset and it is decreased by $152,700. Therefore, credit inventory account with $152,700.

Transaction (b):

Record the journal entry for sales return.

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

 Customer Refunds Payable 30,000 
         Accounts Receivable  30,000
 (To record sales returns)   

Table (3)

  • Customer refunds payable is a liability account and decreased by $30,000...

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Chapter 6 Solutions

Accounting
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