Chapter 5: Q5-13RQ (page 294)
What are the two journal entries involved when recording the sale of inventory when using the perpetual inventory system?
In the perpetual inventory system, two primary journal entries include the following:
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Journalize the following transactions that occurred in November 2018 for May’s Adventure Park. Assume May’s uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.
Nov. 4 Purchased merchandise inventory on account from Valera Company, \(8,000. Terms 1/10, n/EOM, FOB shipping point.
6 Paid freight bill of \)160 on November 4 purchase.
8 Returned half the inventory purchased on November 4 from Valera Company.
10 Sold merchandise inventory for cash,
11 Sold merchandise inventory to Garrison Corporation,
12 Paid freight bill of \(30 on November 10 sale.
13 Sold merchandise inventory to Cain Company, \)9,000, on account, terms of 1/10, n/45. Cost of goods, \(4,500. FOB shipping point.
14 Paid the amount owed on account from November 4, less return and discount.
18 Purchased inventory of \)3,700 on account from Regan Corporation. Payment terms were 2/10, n/30, FOB destination.
20 Received cash from Garrison Corporation, less discount.
26 Paid amount owed on account from November 18, less discount.
28 Received cash from Cain Company.
29 Purchased inventory from Sanders Corporation for cash,
Macarthy Landscape Supply’s selected accounts as of December 31, 2018, follow. Compute the gross profit percentage for 2018.
Selling Expenses $ 12,900
Interest Revenue 900
Net Sales Revenue 134,700
Cost of Goods Sold 114,000
Administrative Expenses 10,200
Consider the following transactions for Toys and More:
May 8 Toys and More buys \(113,300 worth of MegoBlock toys on account with credit terms of 2/10, n/60.
12 Toys and More returns \)11,250 of the merchandise to MegoBlock due to damage during shipment.
15 Toys and More paid the amount due, less the return and discount.
Requirements
1. Journalize the purchase transactions. Explanations are not required.
2. In the final analysis, how much did the inventory cost Toys and More?
Camilia Communications reported the following figures from its adjusted trial balance for its first year of business, which ended on July 31, 2018:
Cash
Selling Expenses 1,400 Equipment, net 9,500
Accounts Payable 4,300 Accrued Liabilities 1,800
Common Stock 4,365 Net Sales Revenue 29,200
Notes Payable, long-term 500 Accounts Receivable 3,200
Merchandise Inventory 1,100 Interest Expense 65
Administrative Expenses 3,300
Requirements
1. Prepare Camilia Communication’s statement of retained earnings for the year ended July 31, 2018. Assume that there were no dividends declared during the year and that the business began on August 1, 2017.
2. Prepare Camilia Communication’s classified balance sheet at July 31, 2018. Use the report format.
Under the new revenue recognition standard, what most companies do at the end of the period related to sales returns? Describe the journal entries that would be recorded.
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