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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

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

Sales-related transactions using perpetual inventory system

The following selected transactions were completed by Amsterdam Supply Co., which sells office supplies primarily to wholesalers and occasionally to retail customers:

Mar. 2. Sold inerchandi.se on account to Equinox Co., $18,900, terms FOB destination, 1/10, n/30. The cost of the merchandise sold was $13,300.
3. Sold merchandise for 511.350 plus 6% sales tax to retail cash customers. The cost of merchandise sold was $7,000.
4. Sold merchandise on account to Empire Co., $55,400, terms FOB shipping point. n/eom. The cost of merchandise sold was $33,200.
5. Sold merchandise for $30,000 plus 6% sales tax to retail customers who used MasterCard. The cost of merchandise sold was $19,400.
12. Received check for amount due from Equinox Co. for sale on March 2.
14. Sold merchandise to customers who used American Express cards, $ 13,700. The cost of merchandise sold was $8,350.
16. Sold merchandise on account to Targhee Co., $27,500. terms FOB shipping point, 1/10, n/30. The cost of merchandise sold was $16,000.
18. Issued credit memo for $4,800 to Targhee Co. for merchandise returned from sale on March 16. The cost of the merchandise returned was $2,900.
19. Sold merchandise on account to Vista Co., $8,250. terms FOB shipping point, 2/10, n/30. Added $75 to the invoice for prepaid freight. The cost of merchandise sold was $5,000.
26. Received check for amount due from Targhee Co. for sale on March 16 less credit memo of March 18.
28. Received check for amount due from Vista Co. for sale of March 19.
31. Received check for amount due from Empire Co. for sale of March 4.
31. Paid Fleetwood Delivery Service $5,600 tor delivery of merchandise in March to customers under shipping terms of FOB destination.
Apr. 3. Paid City Bank $940 for service fees for handling MasterCard and American Express sales during March.
15. Paid $6,544 to state sales tax division for taxes owed on sales.

Instructions

Journalize the entries to record the transactions of Amsterdam Supply Co.

To determine

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

To Record: The sale transactions of the company.

Explanation

Record the journal entry for the sale of inventory on account.

Date Accounts and Explanation Debit ($) Credit ($)
March 2 Accounts receivable 18,711 (1)  
                Sales Revenue   18,711
  (To record the sale of inventory on account)    

Table (1)

Working Note:

Calculate the amount of accounts receivable.

Sales = $18,900

Discount percentage = 1%

Amount of accounts receivable} = (SalesDiscount)=Sales(Sales×1%)= $18,900 – ($18,900×1%)= $18,900$189=$18,711 (1)

Explanation

  • Accounts Receivable is an asset and it is increased by $18,711. Therefore, debit accounts receivable with $18,711.
  • Sales revenue is revenue and it increases the value of equity by $18,711. Therefore, credit sales revenue with $18,711.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
March 2 Cost of Merchandise Sold 13,300  
  Merchandise Inventory   13,300
  (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 $13,300. Therefore, debit cost of merchandise sold account with $13,300.
  • Merchandise Inventory is an asset and it is decreased by $13,300. Therefore, credit inventory account with $13,300.

Record the journal entry for the sale of inventory for cash.

Date Accounts and Explanation Debit ($) Credit ($)
March 3 Cash 12,031 (3)  
  Sales Revenue   11,350
  Sales Tax Payable   681 (2)
  (To record the sale of inventory for cash)    

Table (3)

Working Notes:

Calculate the amount of sales tax payable.

Sales revenue = $11,350

Sales tax percentage = 6%

Sales tax payable = (Sales×Sales tax percentage)=(Sales×6%)($11,350×6%)= $681 (2)

Calculate the amount of cash received.

Sales revenue = $11,350

Sales tax payable = $681 (2)

Cash received = (Sales+Sales tax payable)=$11,350+$681= $12,031 (3)

Explanation

  • Cash is an asset and it is increased by $12,031. Therefore, debit cash account with $12,031.
  • Sales revenue is revenue and it increases the value of equity by $11,350. Therefore, credit sales revenue with $11,350.
  • Sales tax payable is a liability and it is increased by $681. Therefore, credit sales tax payable account with $681.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
March 3 Cost of Merchandise Sold 7,000  
  Merchandise Inventory   7,000
  (To record the cost of goods sold)    

Table (4)

Explanation

  • Cost of merchandise sold is an expense account and it decreases the value of equity by $7,000. Therefore, debit cost of merchandise sold account with $7,000.
  • Merchandise Inventory is an asset and it is decreased by $7,000. Therefore, credit inventory account with $7,000.

Record the journal entry for the sale of inventory on account.

Date Accounts and Explanation Debit ($) Credit ($)
March 4 Accounts receivable 55,400  
                Sales Revenue   55,400
  (To record the sale of inventory on account)    

Table (5)

Explanation

  • Accounts Receivable is an asset and it is increased by $55,400. Therefore, debit accounts receivable with $55,400.
  • Sales revenue is revenue and it increases the value of equity by $55,400. Therefore, credit sales revenue with $55,400.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
March 4 Cost of Merchandise Sold 33,200  
  Merchandise Inventory   33,200
  (To record the cost of goods sold)    

Table (6)

Explanation

  • Cost of merchandise sold is an expense account and it decreases the value of equity by $33,200. Therefore, debit cost of merchandise sold account with $33,200.
  • Merchandise Inventory is an asset and it is decreased by $33,200. Therefore, credit inventory account with $33,200.

Record the journal entry for the sale of inventory for cash.

Date Accounts and Explanation Debit ($) Credit ($)
March 5 Cash 31,800 (5)  
  Sales Revenue   30,000
  Sales Tax Payable   1,800 (4)
  (To record the sale of inventory for cash)    

Table (7)

Working Notes:

Calculate the amount of sales tax payable.

Sales revenue = $30,000

Sales tax percentage = 6%

Sales tax payable = (Sales×Sales tax percentage)=(Sales×6%)($30,000×6%)= $1,800 (4)

Calculate the amount of cash received.

Sales revenue = $30,000

Sales tax payable = $1,800 (2)

Cash received = (Sales+Sales tax payable)=$30,000+$1,800= $31,800 (5)

Explanation

  • Cash is an asset and it is increased by $31,800. Therefore, debit cash account with $31,800.
  • Sales revenue is revenue and it increases the value of equity by $30,000. Therefore, credit sales revenue with $30,000.
  • Sales tax payable is a liability and it is increased by $1,800. Therefore, credit sales tax payable account with $1,800.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
March 5 Cost of Merchandise Sold 19,400  
  Merchandise Inventory   19,400
  (To record the cost of goods sold)    

Table (8)

Explanation

  • Cost of merchandise sold is an expense account and it decreases the value of equity by $19,400. Therefore, debit cost of merchandise sold account with $19,400.
  • Merchandise Inventory is an asset and it is decreased by $19,400. Therefore, credit inventory account with $19,400.

Record the journal entry for the cash receipt against accounts receivable.

Date Accounts and Explanation Debit ($) Credit ($)
March 12 Cash 18,711  
  Accounts Receivable   18,711
  (To record the receipt of cash against accounts receivables)    

Table (9)

Explanation

  • Cash is an asset and it is increased by $18,711. Therefore, debit cash account with $18,711.
  • Accounts Receivable is an asset and it is increased by $18,711. Therefore, debit accounts receivable with $18,711.

Record the journal entry for the sale of inventory for cash.

Date Accounts and Explanation Debit ($) Credit ($)
March 14 Cash 13,700  
  Sales Revenue   13,700
  (To record the sale of inventory for cash)    

Table (10)

Explanation

  • Cash is an asset and it is increased by $13,700. Therefore, debit cash account with $13,700.
  • Sales revenue is revenue and it increases the value of equity by $13,700. Therefore, credit sales revenue with $13,700.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
March 14 Cost of Merchandise Sold 8,350  
  Merchandise Inventory   8,350
  (To record the cost of goods sold)    

Table (11)

Explanation

  • Cost of merchandise sold is an expense account and it decreases the value of equity by $8,350. Therefore, debit cost of merchandise sold account with $8,350.
  • Merchandise Inventory is an asset and it is decreased by $8,350. Therefore, credit inventory account with $8,350.

Record the journal entry for the sale of inventory on account.

Date Accounts and Explanation Debit ($) Credit ($)
March 16 Accounts receivable 27,225 (6)  
                Sales Revenue   27,225
  (To record the sale of inventory on account)    

Table (12)

Working Note:

Calculate the amount of accounts receivable.

Sales = $27,500

Discount percentage = 1%

Amount of accounts receivable} = (SalesDiscount)=Sales(Sales×1%)= $27,500 – ($27,500×1%)= $27,500$275=$27,225 (6)

Explanation

  • Accounts Receivable is an asset and it is increased by $27,225

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