Chapter 4: Problem Set A

Problem 4-1A: Preparing Journal Entries for Merchandising Activities (Cabela’s) 1. July 1: Purchased merchandise from Boden Company for $6,000 under credit terms of 1/15, n/30, FOB shipping point. o Entry:  Debit Merchandise Inventory $6,000  Credit Accounts Payable $6,000 2. July 2: Sold merchandise to Creek Co. for $900 under credit terms of 2/10, n/60, FOB shipping point. The merchandise cost $500. o Entry for Sale:  Debit Accounts Receivable $900  Credit Sales $900 o Entry for Cost:  Debit Cost of Goods Sold $500  Credit Merchandise Inventory $500 3. July 3: Paid $125 cash for freight charges on the purchase of July 1. o Entry:  Debit Merchandise Inventory $125  Credit Cash $125 4. July 4: Sold merchandise that had cost $1,300 for $1,700 cash. o Entry for Sale:  Debit Cash $1,700  Credit Sales $1,700 o Entry for Cost:  Debit Cost of Goods Sold $1,300  Credit Merchandise Inventory $1,300 5. July 9: Purchased merchandise from Leight Co. for $2,200 under credit terms of 2/15, n/60, FOB destination. o Entry:  Debit Merchandise Inventory $2,200  Credit Accounts Payable $2,200 6. July 10: Returned $200 of merchandise purchased on July 9 from Leight Co. o Entry:  Debit Accounts Payable $200  Credit Merchandise Inventory $200 7. July 12: Received balance due from Creek Co. for the invoice dated July 2, net of discount. o Calculation: $900 × 2% = $18 (discount); $900 - $18 = $882 (payment) o Entry:  Debit Cash $882  Debit Sales Discounts $18  Credit Accounts Receivable $900 8. July 16: Paid balance due to Boden Company within the discount period. o Calculation: $6,000 × 1% = $60 (discount); $6,000 - $60 = $5,940 (payment) o Entry:  Debit Accounts Payable $6,000  Credit Cash $5,940  Credit Merchandise Inventory $60 9. July 19: Sold merchandise that cost $800 to Art Co. for $1,200 under credit terms of 2/15, n/60, FOB shipping point. o Entry for Sale:  Debit Accounts Receivable $1,200  Credit Sales $1,200 o Entry for Cost:  Debit Cost of Goods Sold $800  Credit Merchandise Inventory $800 10. July 21: Gave a price reduction (allowance) of $100 to Art Co. for merchandise sold on July 19. o Entry:  Debit Sales Returns and Allowances $100  Credit Accounts Receivable $100 11. July 24: Paid Leight Co. the balance due, net of discount. o Calculation: $2,200 - $200 = $2,000 (adjusted balance), discount = $2,000 × 2% = $40, payment = $2,000 - $40 = $1,960 o Entry:  Debit Accounts Payable $2,000  Credit Cash $1,960  Credit Merchandise Inventory $40 12. July 30: Received balance due from Art Co. for the invoice dated July 19, net of discount. o Calculation: $1,200 - $100 = $1,100 (adjusted balance), discount = $1,100 × 2% = $22, payment = $1,100 - $22 = $1,078 o Entry:  Debit Cash $1,078  Debit Sales Discounts $22  Credit Accounts Receivable $1,100 13. July 31: Sold merchandise that cost $4,800 to Creek Co. for $7,000 under credit terms of 2/10, n/60, FOB shipping point. o Entry for Sale:  Debit Accounts Receivable $7,000  Credit Sales $7,000 o Entry for Cost:  Debit Cost of Goods Sold $4,800  Credit Merchandise Inventory $4,800 Problem 4-2A: Preparing Journal Entries for Merchandising Activities (Lowe’s) 1. Aug. 1: Purchased merchandise from Aron Company for $7,500 under credit terms of 1/10, n/30, FOB destination. o Entry:  Debit Merchandise Inventory $7,500  Credit Accounts Payable $7,500 2. Aug. 5: Sold merchandise to Baird Corp. for $5,200 under credit terms of 2/10, n/60, FOB destination. The merchandise cost $4,000. o Entry for Sale:  Debit Accounts Receivable $5,200  Credit Sales $5,200 o Entry for Cost:  Debit Cost of Goods Sold $4,000  Credit Merchandise Inventory $4,000 3. Aug. 8: Purchased merchandise from Waters Corporation for $5,400 under credit terms of 1/10, n/45, FOB shipping point. o Entry:  Debit Merchandise Inventory $5,400  Credit Accounts Payable $5,400 4. Aug. 9: Paid $125 cash for shipping charges related to the August 5 sale. o Entry:  Debit Delivery Expense $125  Credit Cash $125 5. Aug. 10: Baird returned merchandise from the August 5 sale that had cost $400 and was sold for $600. o Entry for Return:  Debit Sales Returns and Allowances $600  Credit Accounts Receivable $600 o Entry for Cost:  Debit Merchandise Inventory $400  Credit Cost of Goods Sold $400 6. Aug. 12: Received a $400 price reduction from Waters Corporation for the August 8 purchase. o Entry:  Debit Accounts Payable $400  Credit Merchandise Inventory $400 7. Aug. 14: Paid $200 cash for freight charges on the August 1 purchase, reducing the amount owed to Aron Company. o Entry:  Debit Accounts Payable $200  Credit Cash $200 8. Aug. 18: Received the balance due from Baird Corp. for the August 5 sale, less the return. o Calculation: $5,200 - $600 = $4,600 (adjusted balance), discount = $4,600 × 2% = $92, payment = $4,600 - $92 = $4,508 o Entry:  Debit Cash $4,508  Debit Sales Discounts $92  Credit Accounts Receivable $4,600 9. Aug. 19: Sold merchandise to Tux Co. for $4,800 under credit terms of n/10, FOB shipping point. The merchandise cost $2,400. o Entry for Sale:  Debit Accounts Receivable $4,800  Credit Sales $4,800 o Entry for Cost:  Debit Cost of Goods Sold $2,400  Credit Merchandise Inventory $2,400 10. Aug. 22: Gave a $500 price reduction (allowance) to Tux Co. for the August 19 sale. o Entry:  Debit Sales Returns and Allowances $500  Credit Accounts Receivable $500 11. Aug. 29: Received Tux’s cash payment for the August 19 sale, less the price allowance. o Calculation: $4,800 - $500 = $4,300 o Entry:  Debit Cash $4,300  Credit Accounts Receivable $4,300 12. Aug. 30: Paid Aron Company the amount due for the August 1 purchase. o Calculation: $7,500 - $200 = $7,300, discount = $7,300 × 1% = $73, payment = $7,300 - $73 = $7,227 o Entry:  Debit Accounts Payable $7,300  Credit Cash $7,227  Credit Merchandise Inventory $73