Following are the merchandising transactions for Dollar Store.
a) Nov. 1 Dollar Store purchases merchandise for $1,100 on terms of 2/5, n/30, FOB shipping point, invoice dated November 1.
b) 5 Dollar Store pays cash for the November 1 purchase.
c) 7 Dollar Store discovers and returns $100 of defective merchandise purchased on November 1, and paid for on November 5, for a cash refund.
d) 10 Dollar Store pays $55 cash for transportation costs for the November 1 purchase.
e) 13 Dollar Store sells merchandise for $1,188 with terms n/30. The cost of the merchandise is $594.
f) 16 Merchandise is returned to the Dollar Store from the November 13 transaction. The returned items are priced at $270 and cost $135; the items were not damaged and were returned to inventory.
Required:
Journalize the above merchandising transactions for the Dollar Store assuming it uses a perpetual inventory system and the gross method.

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andromache andromache · Answer 1 · 2020-05-26T07:15:09+02:00

Answer and Explanation:

The Journal entry is shown below:-

a. Merchandise Inventory Dr, 1,100

To Accounts Payable $1,100

(Being purchase of inventory is recorded)

b. Accounts Payable Dr, $1,100

Merchandise Inventory Dr, $22 ($1,100 × 2%)

To Cash $1,122

(Being cash paid is recorded)

c. Cash Dr, $98 (100 × 98%)

To Merchandise Inventory $98

(Being cash receipts is recorded)

d. Merchandise Inventory Dr, $55

To Cash $55

(Being cash paid is recorded)

e. Cost of goods sold Dr, $594

To Merchandise Inventory $594

(Being cost of goods sold is recorded)

f. Sales Returns and allowances Dr, $270

To Account Receivables $270

(Being sales returns and allowances is recorded)

g. Merchandise Inventory Dr, $135

To Cost of goods sold $135

(Being cost of returned goods is recorded)