Chapter 4: Problem Set B

Problem 4-1B: Journal Entries for IKEA (Perpetual Inventory System and Gross Method) 1. May 2: Purchased merchandise from Havel Co. for $10,000 under credit terms of 1/15, n/30, FOB shipping point. o Entry:  Debit Merchandise Inventory $10,000  Credit Accounts Payable $10,000 2. May 4: Sold merchandise to Rath Co. for $11,000 under credit terms of 2/10, n/60, FOB shipping point. The merchandise had cost $5,600. o Entry for Sale:  Debit Accounts Receivable $11,000  Credit Sales $11,000 o Entry for Cost:  Debit Cost of Goods Sold $5,600  Credit Merchandise Inventory $5,600 3. May 5: Paid $250 cash for freight charges on the purchase of May 2. o Entry:  Debit Merchandise Inventory $250  Credit Cash $250 4. May 10: Sold merchandise that had cost $2,000 for $2,500 cash. o Entry for Sale:  Debit Cash $2,500  Credit Sales $2,500 o Entry for Cost:  Debit Cost of Goods Sold $2,000  Credit Merchandise Inventory $2,000 5. May 10: Purchased merchandise from Duke Co. for $3,650 under credit terms of 2/15, n/60, FOB destination. o Entry:  Debit Merchandise Inventory $3,650  Credit Accounts Payable $3,650 6. May 14: Returned $650 of merchandise purchased on May 10 from Duke Co. o Entry:  Debit Accounts Payable $650  Credit Merchandise Inventory $650 7. May 17: Received balance due from Rath Co. for the invoice dated May 4, net of discount. o Calculation: $11,000 × 2% = $220 (discount); $11,000 - $220 = $10,780 (payment) o Entry:  Debit Cash $10,780  Debit Sales Discounts $220  Credit Accounts Receivable $11,000 8. May 20: Paid balance due to Havel Co. within the discount period. o Calculation: $10,000 × 1% = $100 (discount); $10,000 - $100 = $9,900 (payment) o Entry:  Debit Accounts Payable $10,000  Credit Cash $9,900  Credit Merchandise Inventory $100 9. May 22: Sold merchandise that cost $1,450 to Tamer Co. for $2,800 under credit terms of 2/15, n/60, FOB shipping point. o Entry for Sale:  Debit Accounts Receivable $2,800  Credit Sales $2,800 o Entry for Cost:  Debit Cost of Goods Sold $1,450  Credit Merchandise Inventory $1,450 10. May 25: Gave a price reduction (allowance) of $300 to Tamer Co. for merchandise sold on May 22. o Entry:  Debit Sales Returns and Allowances $300  Credit Accounts Receivable $300 11. May 30: Paid Duke Co. the balance due, net of discount. o Calculation: $3,650 - $650 = $3,000 (adjusted balance), discount = $3,000 × 2% = $60, payment = $3,000 - $60 = $2,940 o Entry:  Debit Accounts Payable $3,000  Credit Cash $2,940  Credit Merchandise Inventory $60 12. May 30: Received balance due from Tamer Co. for the invoice dated May 22, net of discount and allowance. o Calculation: $2,800 - $300 = $2,500 (adjusted balance), discount = $2,500 × 2% = $50, payment = $2,500 - $50 = $2,450 o Entry:  Debit Cash $2,450  Debit Sales Discounts $50  Credit Accounts Receivable $2,500 13. May 31: Sold merchandise that cost $3,600 to Rath Co. for $7,200 under credit terms of 2/10, n/60, FOB shipping point. o Entry for Sale:  Debit Accounts Receivable $7,200  Credit Sales $7,200 o Entry for Cost:  Debit Cost of Goods Sold $3,600  Credit Merchandise Inventory $3,600 Problem 4-2B: Journal Entries for Menards (Perpetual Inventory System and Gross Method) 1. July 3: Purchased merchandise from OLB Corp. for $15,000 under credit terms of 1/10, n/30, FOB destination. o Entry:  Debit Merchandise Inventory $15,000  Credit Accounts Payable $15,000 2. July 7: Sold merchandise to Brill Co. for $11,500 under credit terms of 2/10, n/60, FOB destination. The merchandise cost $7,750. o Entry for Sale:  Debit Accounts Receivable $11,500  Credit Sales $11,500 o Entry for Cost:  Debit Cost of Goods Sold $7,750  Credit Merchandise Inventory $7,750 3. July 10: Purchased merchandise from Rupert Co. for $14,200 under credit terms of 1/10, n/45, FOB shipping point. o Entry:  Debit Merchandise Inventory $14,200  Credit Accounts Payable $14,200 4. July 11: Paid $300 cash for shipping charges related to the July 7 sale to Brill Co. o Entry:  Debit Delivery Expense $300  Credit Cash $300 5. July 12: Brill returned merchandise from the July 7 sale that had cost $1,450 and was sold for $2,000. o Entry for Return:  Debit Sales Returns and Allowances $2,000  Credit Accounts Receivable $2,000 o Entry for Cost:  Debit Merchandise Inventory $1,450  Credit Cost of Goods Sold $1,450 6. July 14: Received a price reduction from Rupert Co. of $1,200 on the July 10 purchase. o Entry:  Debit Accounts Payable $1,200  Credit Merchandise Inventory $1,200 7. July 15: Paid $200 cash for freight charges on the July 3 purchase, reducing the amount owed to OLB Corp. o Entry:  Debit Accounts Payable $200  Credit Cash $200 8. July 17: Received balance due from Brill Co. for the July 7 sale, less the return. o Calculation: $11,500 - $2,000 = $9,500 (adjusted balance), discount = $9,500 × 2% = $190, payment = $9,500 - $190 = $9,310 o Entry:  Debit Cash $9,310  Debit Sales Discounts $190  Credit Accounts Receivable $9,500 9. July 20: Paid the amount due Rupert Co. for the July 10 purchase less the price reduction. o Calculation: $14,200 - $1,200 = $13,000, discount = $13,000 × 1% = $130, payment = $13,000 - $130 = $12,870 o Entry:  Debit Accounts Payable $13,000  Credit Cash $12,870  Credit Merchandise Inventory $130 10. July 21: Sold merchandise to Brown for $11,000 under credit terms of 1/10, n/30, FOB shipping point. The merchandise cost $7,000. o Entry for Sale:  Debit Accounts Receivable $11,000  Credit Sales $11,000 o Entry for Cost:  Debit Cost of Goods Sold $7,000  Credit Merchandise Inventory $7,000 11. July 24: Gave a $1,000 price reduction (allowance) to Brown on the July 21 sale. o Entry:  Debit Sales Returns and Allowances $1,000  Credit Accounts Receivable $1,000 12. July 30: Received Brown’s cash payment for the July 21 sale, net of the price allowance. o Calculation: $11,000 - $1,000 = $10,000, discount = $10,000 × 1% = $100, payment = $10,000 - $100 = $9,900 o Entry:  Debit Cash $9,900  Debit Sales Discounts $100  Credit Accounts Receivable $10,000 13. July 31: Paid OLB Corp. the amount due from the July 3 purchase. o Calculation: $15,000 - $200 = $14,800, discount = $14,800 × 1% = $148, payment = $14,800 - $148 = $14,652 o Entry:  Debit Accounts Payable $14,800  Credit Cash $14,652  Credit Merchandise Inventory $148