Question

Journalize the following transactions that occurred in February 2018 for Oceanic. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Oceanic estimates sales returns at the end of each month.

Feb. 3 Purchased merchandise inventory on account from Silton Wholesalers, \(5,200. Terms 2/15, n/EOM, FOB shipping point.

4 Paid freight bill of \)70 on February 3 purchase.

4 Purchased merchandise inventory for cash of \(1,500.

6 Returned \)900 of inventory from February 3 purchase.

8 Sold merchandise inventory to Herenda Company, \(5,600, on account. Terms 3/15, n/35. Cost of goods, \)2,352.

9 Purchased merchandise inventory on account from Teddy Wholesalers, \(7,000. Terms 1/10, n/30, FOB destination.

10 Made payment to Silton Wholesalers for goods purchased on February 3, less return and discount.

12 Received payment from Herenda Company, less discount.

13 After negotiations, received a \)500 allowance from Teddy Wholesalers.

15 Sold merchandise inventory to Jordon Company, \(3,400, on account. Terms n/EOM. Cost of goods, \)1,496.

22 Made payment, less allowance, to Teddy Wholesalers for goods purchased on February 9.

23 Jordon Company returned \(1,000 of the merchandise sold on February 15. Cost of goods, \)440.

25 Sold merchandise inventory to Smith for \(1,700 on account that cost \)663. Terms of 2/10, n/30 were offered, FOB shipping point. As a courtesy to Smith, $70 of freight was added to the invoice for which cash was paid by Oceanic.

27 Received payment from Smith, less discount.

28 Received payment from Jordon Company, less return.

Short answer

The total of debit and credit is $52,641.

Step-by-step solution

Meaning of Sales Returns

In accounting, the term sales returns refer to a situation when customers return the goods sold to them, to the business. The major cause of sales returns is defective or damaged goods, and it decreases thesales revenue of themerchandiser.

Preparation of journal entries

Date	Accounts and Explanation	Debit ($)	Credit ($)
2018
Feb 3	Merchandise inventory	5,200
	Accounts payable (Silton Wholesalers)		5,200
Feb 4	Merchandise inventory	70
	Cash		70
Feb 4	Merchandise inventory	1,500
	Cash		1,500
Feb 6	Accounts payable (Silton wholesalers)	900
	Merchandise inventory		900
Feb 8	Accounts receivable (Herenda company)	5,600
	Sales revenue		5,600
Feb 8	Cost of goods sold	2,532
	Merchandise inventory		2,532
Feb 9	Merchandise inventory	7,000
	Accounts payable (Teddy Wholesalers)		7,000
Feb 10	Accounts payable (Silton wholesalers) [5,200-900]	4,300
	Merchandise inventory (4300*2%)		86
	Cash		4,214
Feb 12	Cash	5,432
	Sales discount (5600*3%)	168
	Accounts receivable (Herenda company)		5,600
Feb 13	Accounts payable (Teddy wholesalers)	500
	Merchandise inventory		500
Feb 15	Accounts receivable (Jordon company)	3,400
	Sales revenue		3,400
Feb 15	Cost of goods sold	1,496
	Merchandise inventory		1,496
Feb 22	Accounts payable (Teddy wholesalers) [7000-500]	6,500
	Merchandise inventory (6500*1%)		65
	Cash		6,435
Feb 23	Sales returns and allowances	1,000
	Accounts receivable (Jordon company)		1,000
Feb 23	Merchandise inventory	440
	Cost of goods sold		440
Feb 25	Accounts receivable (Smith)	1,770
	Sales revenue		1,700
	Cash		70
Feb 25	Cost of goods sold	663
	Merchandise inventory		663
Feb 27	Cash	1,736
	Sales discount (1700*2%)	34
	Accounts receivable (Smith)		1,770
Feb 28	Cash (3400-1000)	2,400
	Accounts receivable (Jordan company)		2,400