Question

Prepare journal entries to record the following merchandising transactions of IKEA, which uses the perpetual inventory system and gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on May 2 in Accounts Payable—Havel.)

May 2 Purchased merchandise from Havel Co. for \(10,000 under credit terms of 1∕15, n∕30, FOB shipping point, invoice dated May 2.

4 Sold merchandise to Rath Co. for \)11,000 under credit terms of 2∕10, n∕60, FOB shipping point, invoice dated May 4. The merchandise had cost \(5,600.

5 Paid \)250 cash for freight charges on the purchase of May 2.

9 Sold merchandise that had cost \(2,000 for \)2,500 cash.

10 Purchased merchandise from Duke Co. for \(3,650 under credit terms of 2∕15, n∕60, FOB destination, invoice dated May 10.

12 Received a \)650 credit memorandum from Duke Co. for the return of a portion of the merchandise purchased on May 10.

14 Received the balance due from Rath Co. for the invoice dated May 4, net of the discount.

17 Paid the balance due to Havel Co. within the discount period.

20 Sold merchandise that cost \(1,450 to Tamer Co. for \)2,800 under credit terms of 2∕15, n∕60, FOB shipping point, invoice dated May 20.

22 Issued a \(300 credit memorandum to Tamer Co. for an allowance on goods sold on May 20. 4

25 Paid Duke Co. the balance due, net of the discount.

30 Received the balance due from Tamer Co. for the invoice dated May 20, net of discount and allowance.

31 Sold merchandise that cost \)3,600 to Rath Co. for $7,200 under credit terms of 2∕10, n∕60, FOB shipping point, invoice dated May 31.

Short answer

Answer

Both sides of the journal totals$78,150.

Step-by-step solution

Step-by-Step SolutionStep 1: Definition of Accounts Payable

Accounts payable can be defined as the current liability account that represents revenue still not received from the customer to whom credit sales were made.

Journal Entries

Date	Accounts and Explanation	Debit $	Credit $
2 May	Merchandise inventory	$10,000
	Account payable – Havel		$10,000
4 May	Accounts receivables – Rath Co.	11,000
	Sales revenue		11,000
	Cost of goods sold	5,600
	Merchandise inventory		5,600
5 May	Inventory	250
	Cash		250
9 May	Cash	2,500
	Sales revenue		2,500
	Cost of goods sold	2,000
	Merchandise inventory		2,000
10 May	Merchandise inventory –	3,650
	Accounts payable – Duke Co.		3,650
12 May	Accounts payable – Duke Co.	650
	Merchandise inventory		650
14 May	Cash	10,780
	Discount allowed	220
	Accounts receivables – Rath Co.		11,000
17 May	Accounts payable – Havel Co.	10,000
	Discount received		100
	Cash		9,900
20 May	Accounts receivables – Tamer Co.	2,800
	Sales revenue		2,800
	Cost of goods sold	1,450
	Merchandise inventory		1,450
22 May	Sales return and allowances	300
	Accounts receivables – Tamer Co.		300
25 May	Accounts payable – Duke Co.	3,000
	Discount received		60
	Cash		2,940
30 May	Cash	2,450
	Discount allowed	50
	Accounts receivables – Tamer Co.		2,500
31 May	Accounts receivables – Rath Co.	7,200
	Sales revenue		7,200
	Cost of goods sold	3,600
	Merchandise inventory		3,600
		$78,150	$78,150