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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Sales-related transactions using perpetual inventory system

The following selected transactions were completed by Green Lawn Supplies Co., which sells irrigation supplies primarily to wholesalers and occasionally to retail customers:

July l. Sold merchandise on account to landscapes Co., $33,450, terms FOB shipping point, n/eom. The cost of merchandise sold was $20,000.
2. Sold merchandise for $86,000 plus 8% .sales lax to retail cash customers. The cost of merchandise sold was $51,600.
5. Sold merchandise on account to Peacock Company, $17,500, terms FOB destination, 1/10, n/30. The cost of merchandise sold was $10,000.
8. Sold merchandise for 5112,000 plus 8% sales tax to retail customers who used VISA cards. The cost of merchandise sold was $67,200.
13. Sold merchandise to customers who used MasterCard cards, $96,000. The cost of merchandise sold was $57,600.
14. Sold merchandise on account to Loeb Co., $16,000, terms FOB shipping point, 1/10, n/30. The cost of' merchandise sold was $9,000.
15. Received check for amount due from Peacock Company for sale on July 5.
16. Issued credit memo for $3,000 to Loeb Co. for merchandise returned from sale on July 14. The cost of the merchandise returned was $1,800.
18. Sold merchandise on account to Jennings Company. $11,350, terms FOB shipping point, 2/10, n/30. Paid $475 for freight and added it to the invoice. The cost of merchandise sold was $6,800.
24. Received check for amount due from Loeb Co. for sale on July 14 less credit memo of July 16.
28. Received check for amount due from Jennings Company for sale of July 18.
31. Paid Black Lab Delivery Service $8,550 for delivery of merchandise in July to customers under shipping terms of FOB destination.
31. Received check for amount due from Landscapes Co. for sale of July 1.
Aug. 3. Paid Hays Federal Bank $3,770 for service fees for handling MasterCard and VISA sales during July.
10. Paid $41,260 to state sales tax division for taxes owed on sales.

Instructions

Journalize the entries to record the transactions of Green Lawn Supplies 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 ($) Credit ($)
July 1 Accounts receivable 33,450  
                Sales Revenue   33,450
  (To record the sale of inventory on account)    

Table (1)

Explanation

  • Accounts Receivable is an asset and it is increased by $33,450. Therefore, debit accounts receivable with $33,450.
  • Sales revenue is revenue and it increases the value of equity by $33,450. Therefore, credit sales revenue with $33,450.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
July 1 Cost of Merchandise Sold 20,000  
  Merchandise Inventory   20,000
  (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 $20,000. Therefore, debit cost of merchandise sold account with $20,000.
  • Merchandise Inventory is an asset and it is decreased by $20,000. Therefore, credit inventory account with $20,000.

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

Date Accounts and Explanation Debit ($) Credit ($)
July 2 Cash 92,880 (2)  
  Sales Revenue   86,000
  Sales Tax Payable   6,880 (1)
  (To record the sale of inventory for cash)    

Table (3)

Working Notes:

Calculate the amount of sales tax payable.

Sales revenue = $86,000

Sales tax percentage = 8%

Sales tax payable = (Sales×Sales tax percentage)=(Sales×6%)($86,000×8%)= $6,880 (1)

Calculate the amount of cash received.

Sales revenue = $86,000

Sales tax payable = $6,880 (1)

Cash received = (Sales+Sales tax payable)=$86,000+$6,880= $92,880 (2)

Explanation

  • Cash is an asset and it is increased by $92,880. Therefore, debit cash account with $92,880.
  • Sales revenue is revenue and it increases the value of equity by $86,000. Therefore, credit sales revenue with $86,000.
  • Sales tax payable is a liability and it is increased by $6,880. Therefore, credit sales tax payable account with $6,880.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
July 2 Cost of Merchandise Sold 51,600  
  Merchandise Inventory   51,600
  (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 $51,600. Therefore, debit cost of merchandise sold account with $51,600.
  • Merchandise Inventory is an asset and it is decreased by $51,600. Therefore, credit inventory account with $51,600.

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

Date Accounts and Explanation Debit ($) Credit ($)
July 5 Accounts receivable 17,325 (3)  
                Sales Revenue   17,325
  (To record the sale of inventory on account)    

Table (5)

Working Note:

Calculate the amount of accounts receivable.

Sales = $17,500

Discount percentage = 1%

Amount of accounts receivable} = (SalesDiscount)=Sales(Sales×1%)= $17,500 – ($17,500×1%)= $17,500$175=$17,325 (3)

Explanation

  • Accounts Receivable is an asset and it is increased by $17,325. Therefore, debit accounts receivable with $17,325.
  • Sales revenue is revenue and it increases the value of equity by $17,325. Therefore, credit sales revenue with $17,325.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
July 5 Cost of Merchandise Sold 10,000  
  Merchandise Inventory   10,000
  (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 $10,000. Therefore, debit cost of merchandise sold account with $10,000.
  • Merchandise Inventory is an asset and it is decreased by $10,000. Therefore, credit inventory account with $10,000.

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

Date Accounts and Explanation Debit ($) Credit ($)
July 8 Cash 120,960 (5)  
  Sales Revenue   112,000
  Sales Tax Payable   8,960 (4)
  (To record the sale of inventory for cash)    

Table (7)

Working Notes:

Calculate the amount of sales tax payable.

Sales revenue = $112,000

Sales tax percentage = 8%

Sales tax payable = (Sales×Sales tax percentage)=(Sales×6%)($112,000×8%)= $8,960 (4)

Calculate the amount of cash received.

Sales revenue = $112,000

Sales tax payable = $8,960 (4)

Cash received = (Sales+Sales tax payable)=$112,000+$8,960= $120,960 (5)

Explanation

  • Cash is an asset and it is increased by $120,960. Therefore, debit cash account with $120,960.
  • Sales revenue is revenue and it increases the value of equity by $112,000. Therefore, credit sales revenue with $112,000.
  • Sales tax payable is a liability and it is increased by $8,960. Therefore, credit sales tax payable account with $8,960.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
July 8 Cost of Merchandise Sold 67,200  
  Merchandise Inventory   67,200
  (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 $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 sale of inventory for cash.

Date Accounts and Explanation Debit ($) Credit ($)
July 13 Cash 96,000  
  Sales Revenue   96,000
  (To record the sale of inventory for cash)    

Table (9)

Explanation

  • Cash is an asset and it is increased by $96,000. Therefore, debit cash account with $96,000.
  • Sales revenue is revenue and it increases the value of equity by $96,000. Therefore, credit sales revenue with $96,000.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
July 13 Cost of Merchandise Sold 57,600  
  Merchandise Inventory   57,600
  (To record the cost of goods sold)    

Table (10)

Explanation

  • Cost of merchandise sold is an expense account and it decreases the value of equity by $57,600. Therefore, debit cost of merchandise sold account with $57,600.
  • Merchandise Inventory is an asset and it is decreased by $57,600. Therefore, credit inventory account with $57,600.

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

Date Accounts and Explanation Debit ($) Credit ($)
July 14 Accounts receivable 15,840 (6)  
                Sales Revenue   15,840
  (To record the sale of inventory on account)    

Table (11)

Working Note:

Calculate the amount of accounts receivable.

Sales = $16,000

Discount percentage = 1%

Amount of accounts receivable} = (SalesDiscount)=Sales(Sales×1%)= $16,000 – ($16,000×1%)= $16,000$160=$15,840 (6)

Explanation

  • Accounts Receivable is an asset and it is increased by $15,840. Therefore, debit accounts receivable with $15,840

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