Question

Journalize the following transactions for Master Bicycles using the periodic inventory system. Explanations are not required.

Nov. 2 Purchased \(3,400 of merchandise inventory under terms 2/10, n/EOM, and FOB shipping point.

6 Returned \)800 of defective merchandise purchased on November 2.

8 Paid freight bill of \(100 on November 2 purchase.

10 Sold merchandise inventory on account for \)6,100. Payment terms were 3/15, n/45.

11 Paid amount owed on credit purchase of November 2, less the return and the discount.

22 Received cash from November 10 customer in full settlement of their debt, less the discount.

Short answer

The total of debits and credits is$19,100.

Step-by-step solution

Meaning of Merchandise Inventory

In accounting, merchandise inventory indicates the goods or products stocked/held by a business concern to resale and generate revenues. An inventory consists of various stages such asraw material, work-in-progress, and finished goods.

Preparation of journal entries

Date	Accounts and Explanation	Debit ($)	Credit ($)
Nov 2	Purchases	3,400
	Accounts payable		3,400
Nov 6	Accounts payable	800
	Purchase returns		800
Nov 8	Freight-in	100
	Cash		100
Nov 10	Accounts receivable	6,100
	Sales		6,100
Nov 11	Accounts payable (3400-800)	2,600
	Purchase discount (2600*2%)		52
	Cash		2,548
Nov 22	Cash	5,917
	Sales discount (6100*3%)	183
	Accounts receivable		6,100