Question

Prepare the journal entries to record the following transactions on Pharoah Company's books using a perpetual inventory system. (If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) 

(a) On March 2, Shamrock Company sold $934,300 of merchandise to Pharoah Company on account, terms 2/10, n/30. The cost of the merchandise sold was $508,200. 

(b) On March 6, Pharoah Company returned $107.900 of the merchandise purchased on March 2. The cost of the merchandise returned was $60,600. 

(c) On March 12, Shamrock Company received the balance due from Pharoah Company. 

Answer 1

Perpetual inventory system:

Journal entries in the books of Pharoah Company (Buyer):

No.	Date	Account title and explanation	Debit	Credit
(a)	March 2	Inventory	$934,300
		Accounts payable		$934,300
		[To record purchase of inventory on account]
(b)	March 6	Accounts payable	$107,900
		Inventory		$107,900
		[To record purchase returns]
(c )	March 12	Accounts payable (934,300 - 107,900)	$826,400
		Cash		$809,872
		Inventory (826,400 x 2%)		$16,528
		[To record payment for accounts payable]