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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Transactions for buyer and seller

Sather Co. sold merchandise to Boone Co. on account, $31,800, terms 2/15, n/ 30. The cost of the merchandise sold is $19,000. Journalize the entries for Sather Co. and Boone Co. for the sale, purchase, and payment of amount due.

To determine

Purchases is an activity of acquiring the merchandise inventory of a business.

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

To Record: The sales transactions in the books of Company S.

Explanation

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

Date Accounts and Explanation Debit ($) Credit ($)
  Accounts Receivable 31,164 (1)  
  To Sales   31,164
  (To record the sale of inventory on account after discount)    

Table (1)

Working Note:

Calculate the amount of accounts receivable.

Sales = $31,800

Discount Percentage = 2%

Amount of accounts receivable} = SalesDiscount=Sales(Sales×2%)= $31,800 – ($31,800×2%)= $31,800$636=$31,164 (1)

  • Accounts Receivable is an asset and it is increased by $31,164. Therefore, debit account receivable with $31,164.
  • Sales is revenue and it increases the value of equity by $31,164. Therefore, credit sales with $31,164.

Record the journal entry for cost of goods sold.

Date Accounts and Explanation Debit ($) Credit ($)
  Cost of Merchandise Sold 19,000  
  Merchandise Inventory   19,000
  (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 $19,000. Therefore, debit cost of merchandise sold account with $19,000.
  • Merchandise Inventory is an asset and it is decreased by $19,000. Therefore, credit inventory account with $19,000.

Record the journal entry for the balance amount received.

Date Account Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

  Cash   31,164  
            Accounts Receivable     31,164
  (To record cash received less discount)      

Table (3)

  • Cash is an asset and it is increased by $31,164

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