FINANCIAL ACCOUNTING (LOOSELEAF)
FINANCIAL ACCOUNTING (LOOSELEAF)
10th Edition
ISBN: 9781260481358
Author: Libby
Publisher: MCG
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Chapter 7, Problem 23E

1.

To determine

Record the journal entry for the credit sale under perpetual inventory system.

1.

Expert Solution
Check Mark

Answer to Problem 23E

The journal entry for the credit sale is recorded as follows:

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

February 1Accounts Receivable1,500
Sales1,500
(To record the sales made on account)
February 1Cost of Goods Sold975
Merchandised Inventory975
(To record the cost of goods sold)

Table (1)

Explanation of Solution

  • Accounts receivable is an asset and increased by $1,500. Therefore, debit accounts receivable account with $1,500.
  • Sales are revenue and increased by $1,500. Therefore, credit sales account with $1,500.
  • Cost of goods sold is an expense and increased which has decreased the equity by $975. Therefore, debit cost of goods sold account with $975.
  • Merchandised inventory is an asset and decreased by $975. Therefore, credit the merchandised inventory account with $975.

2.

To determine

Record the journal entry for the account receivable that was collected in full on February 9.

2.

Expert Solution
Check Mark

Answer to Problem 23E

The journal entry for the account receivable that was collected on February 9 is recorded as follows:

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

February 9Cash (2)1,470
Sales discounts (1)30
Accounts Receivable1,500
(To record the sale discounts)

Table (2)

Explanation of Solution

  • Cash is an asset and increased by $1,470. Therefore, debit cash account with $1,470.
  • Sale discount is a contra-sale account (with normal debit balance) and increased by $30. Therefore, credit the sale discount account with $30.
  • Accounts receivable is an asset and decreased by $1,500. Therefore, credit accounts receivable account with $1,500.

Working note:

Compute the amount of sale discount:

Discount Amount = [Sales Invoice×Rate of Discount]=$1,500×2%=$30 (1)

Determine the amount of cash:

Cash = [SaleSales Discount]=$1,500$30=$1,470 (2)

3.

To determine

Record the journal entry for the account receivable that was collected in full on March 2.

3.

Expert Solution
Check Mark

Answer to Problem 23E

The journal entry for the account receivable that was collected in full on March 2 is recorded as follows:

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

March 2Cash1,500
Accounts Receivable1,500
(To record the sales discounts)

Table (3)

Explanation of Solution

  • Cash is an asset and increased by $1,500. Therefore, debit cash account with $1,500.
  • Accounts receivable is an asset and decreased by $1,500. Therefore, credit accounts receivable account with $1,500.

4.

To determine

Record the journal entry for the purchase made on credit.

4.

Expert Solution
Check Mark

Answer to Problem 23E

The journal entry for the purchase made on credit is recorded as follows:

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

March 4Merchandised Inventory9,000
Accounts Payable9,000
(To record the purchase of inventories on account)

Table (4)

Explanation of Solution

  • Merchandised inventory is an asset and increased by $9,000. Therefore, debit the merchandised inventory account with $9,000.
  • Accounts payable is a liability and increased by $9,000. Therefore, credit the accounts payable account with $9,000.

5.

To determine

Record the journal entry for the account payable that was paid in full on March 12.

5.

Expert Solution
Check Mark

Answer to Problem 23E

Record the journal entry for the account payable that was paid in full on March 12.

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

March 12Accounts Payable9,000
Inventory (3)270
Cash (4)8,730
(To record the payment made to the supplier)

Table (5)

Explanation of Solution

  • Accounts Payable is liability and decreased by $9,000. Therefore, debit the accounts payable account with $9,000.
  • Merchandised inventory is an asset and decreased by $270. Therefore, credit the merchandised inventory account with $270.
  • Cash is an asset and decreased by $8,730. Therefore, credit cash account with $8,730.

Working notes:

Compute the amount of purchase discount:

Discount Amount = [Purchase Invoice×Rate of Discount]=$9,000×3%=$270 (3)

Determine the amount of cash:

Cash=Invoice PricePurchase discount=$9,000$270=$8,730 (4)

6.

To determine

Record the journal entry for the account payable that was paid in full on March 28.

6.

Expert Solution
Check Mark

Answer to Problem 23E

Record the journal entry for the account payable that was paid in full on March 28.

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

March 12Accounts Payable9,000
Cash9,000
(To record the payment made to the supplier)

Table (6)

Explanation of Solution

  • Accounts Payable is liability and decreased by $9,000. Therefore, debit the accounts payable account with $9,000.
  • Cash is an asset and decreased by $9,000. Therefore, credit cash account with $9,000.

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Chapter 7 Solutions

FINANCIAL ACCOUNTING (LOOSELEAF)

Ch. 7 - 1. Consider the following information: ending...Ch. 7 - 2. The inventory costing method selected by a...Ch. 7 - 3. Which of the following is not a component of...Ch. 7 - 4. Consider the following information: beginning...Ch. 7 - 5. Consider the following information: beginning...Ch. 7 - 6. An increasing inventory turnover...Ch. 7 - Prob. 7MCQCh. 7 - Which of the following regarding the lower of cost...Ch. 7 - 9. Which inventory method provides a better...Ch. 7 - Which of the following is false regarding a...Ch. 7 - Matching Inventory Items to Type of Business Match...Ch. 7 - Recording the Cost of Purchases for a...Ch. 7 - Identifying the Cost of Inventories for a...Ch. 7 - JCPenney Company, Inc., is a major department...Ch. 7 - M7-5 Matching Financial Statement Effects to...Ch. 7 - M7-6 Matching Inventory Costing Method Choices to...Ch. 7 - M7-7 Reporting Inventory under Lower of Cost or...Ch. 7 - M 7-8 Determining the Effects of Inventory...Ch. 7 - Determining the Financial Statement Effects of...Ch. 7 - Based on its physical count of inventory in its...Ch. 7 - Prob. 2ECh. 7 - Prob. 3ECh. 7 - Abercrombie and Fitch is a leading retailer of...Ch. 7 - Nittany Company uses a periodic inventory system....Ch. 7 - E7-6 Calculating Ending Inventory and Cost of...Ch. 7 - Emily Company uses a periodic inventory system. At...Ch. 7 - Givoly Inc. uses a periodic inventory system. At...Ch. 7 - Evaluating the Choice among Three Alternative...Ch. 7 - Following is partial information for the income...Ch. 7 - Daniel Company uses a periodic inventory system....Ch. 7 - H.T. Tan Company is preparing the annual financial...Ch. 7 - Sanchez Company was formed on January 1 of the...Ch. 7 - Dell Inc. is the leading manufacturer of personal...Ch. 7 - E7-1 5 Analyzing and Interpreting the Effects of...Ch. 7 - The following note was contained in a recent Ford...Ch. 7 - BorgWarner Inc. is a leading global supplier of...Ch. 7 - Several years ago, the financial statements of...Ch. 7 - Analyzing and Interpreting the Impact of an...Ch. 7 - Prob. 20ECh. 7 - E7-21 (Chapter Supplement A) Analyzing the Effects...Ch. 7 - Assume that a retailer’s beginning inventory and...Ch. 7 - Prob. 23ECh. 7 - Travis Company has just completed a physical...Ch. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Analyzing and Interpreting Income Manipulation...Ch. 7 - Prob. 5PCh. 7 - Jaffa Company prepared its annual financial...Ch. 7 - Evaluating the Effects of Manufacturing Changes on...Ch. 7 - An annual report for International Paper Company...Ch. 7 - The income statement for Pruitt Company summarized...Ch. 7 - P7-1 0 (Chapter Supplement A) Analyzing LIFO and...Ch. 7 - Prob. 1APCh. 7 - Prob. 2APCh. 7 - Prob. 3APCh. 7 - Analyzing and Interpreting the Effects of...Ch. 7 - Evaluating the Choice of Inventory Method When...Ch. 7 - Finding Financial Information Refer to the...Ch. 7 - Prob. 2CPCh. 7 - Refer to the financial statements of American...Ch. 7 - Using Financial Reports: Interpreting the Effect...Ch. 7 - Prob. 5CPCh. 7 - Prob. 6CPCh. 7 - Prob. 7CP
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