Question

Journalize the following transactions for Santa Fe Art Gift Shop. Assume Santa Fe uses the gross method to record sales revenue. Explanations are not required.

Feb. 3 Purchased \(2,800 of merchandise inventory on account under terms 3/10, n/EOM and FOB shipping point.

7 Returned \)700 of defective merchandise purchased on February 3.

9 Paid freight bill of \(400 on February 3 purchase.

10 Sold merchandise inventory on account for \)4,800. Payment terms were 1/15, n/30. These goods cost the company $2,400.

12 Paid amount owed on credit purchase of February 3, less the return and the discount.

28 Received cash from February 10 customer in full settlement of their debt.

Short answer

The total of debits and credits is$18,000.

Step-by-step solution

Meaning of Sales Revenue

In accounting, sales revenue refers to the amount of money generated by a business concerned by selling goods or services to the customers. Sales revenue is considered to be anoperating income and is the primary source of generating revenues.

Preparation of journal entries

Date	Accounts and Explanation	Debit ($)	Credit ($)
Feb 3	Merchandise inventory	2,800
	Accounts payable		2,800
Feb 7	Accounts payable	700
	Merchandise inventory		700
Feb 9	Freight-in	400
	Cash		400
Feb 10	Accounts receivable	4,800
	Sales revenue		4,800
Feb 10	Cost of goods sold	2,400
	Merchandise inventory		2,400
Feb 12	Accounts payable (2800-700)	2,100
	Cash		2,037
	Merchandise inventory (2100*3%)		63
Feb 28	Cash	4,800
	Accounts receivable		4,800