Question

Journalize the following merchandise transactions. Refer to the Chart of Accounts for exact wording of account titles.

Mar.	1	Sold merchandise on account, $72,500 with terms 2/10, n/30. The cost of the merchandise sold was $43,500.
	9	Received payment less the discount.
	13	Issued a credit memo for returned merchandise that was sold for $2,300 terms n/30. The cost of the merchandise returned was $1,600.

CHART OF ACCOUNTS
General Ledger
ASSETS 110 Cash 120 Accounts Receivable 125 Notes Receivable 130 Merchandise Inventory 131 Estimated Returns Inventory 140 Office Supplies 141 Store Supplies 142 Prepaid Insurance 180 Land 190 Equipment 191 Accumulated Depreciation-Equipment 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 216 Salaries Payable 218 Sales Tax Payable 219 Customers Refunds Payable 220 Unearned Rent 221 Notes Payable EQUITY 310 Owner, Capital 311 Owner, Drawing 312 Income Summary	REVENUE 410 Sales 610 Rent Revenue EXPENSES 510 Cost of Merchandise Sold 521 Delivery Expense 522 Advertising Expense 524 Depreciation Expense-Store Equipment 525 Depreciation Expense-Office Equipment 526 Salaries Expense 531 Rent Expense 533 Insurance Expense 534 Store Supplies Expense 535 Office Supplies Expense 536 Credit Card Expense 539 Miscellaneous Expense 710 Interest Expense

Answer 1

A. sold merchandise on account $72,500 with terms 2/10, n/30. The cost of merchandise sold

was $43,500.

B. Received payment less the discount.

72,500 - (72,500*.02) = 71,050

A) Accounts Receivable 71,050

Sales 71,050

Cost of Goods Sold 43,500

Inventory 43,500

B) Cash 71,050

Accounts Receivable 71,050

C) Customer Refunds payable 2300

Accounts Receivable 2300

(To record the sales return)

Answer 2

Concepts and reason

Merchandise Inventory: It is an asset to the Company. These are goods of the company which can be in forms of raw material, work in progress and finished goods. These goods were held by the company in day to day operations of the business.

Fundamentals

Journal:

Journal entry is the first step in the accounting. It is recorded to keep accounting transaction in the chronological order, after recording the journal entries; ledger can be prepared and financial statements afterwards.

Meaning of term 2/10, n/30:

This term means that if the payment is made within 10 days, then 2% discount will be provided on the invoice value. If the payment is made within 30 days, then no discount will be provided. It means the seller has given 30 days’ credit period.

Net method:

Under net method, the sales are recorded at the net amount (after providing cash discount).

Working note:

Compute the sales value net of discounts as shown below:

Prepare the journal entry to record the sales as shown below:

Prepare the journal to record the receipt of payment.

Ans:

Part 2