Question

Question 3 (12 marks) This question consists of two separate parts. Part A (7 marks) Caron Butler Ltd uses perpetual inventory system. The following transactions were undertaken during the month of April 2019. 5 April Purchased $70,000 inventory on account from ABC Ltd, terms 2/10, n/30. 7 April Returned $5,500 of the inventory purchased on 5 April to the supplier (ABC Ltd). 12 April Paid the amount due to ABC Ltd. 20 April Sold inventory $120,000 to XYZ Ltd on account, terms 3/5, n/30. The cost of the inventory sold was $80,000 24 April Received cash from XYZ Ltd in settlement of sales on 20 April. Required: Journalise the above transactions in the books of Caron Butler Ltd. Ignore GST. Narrations are not required.

Answer 1

Journal Entries
Sr. No.	Date	Account Title and explanation	Debit	Credit
1	April, 05	Inventory	$70,000
		Account Payable - ABC Ltd.		$70,000
2	April, 07	Account Payable - ABC Ltd.	$5,500
		Purchase Returns		$5,500
3	April, 12	Account Payable - ABC Ltd.	$64,500
		Cash		$63,210
		Purchase Discount ($ 64,500 X 2%)		$1,290
4	April, 20	Account Receivable - XYZ Ltd.	$1,20,000
		Sales Revenue		$1,20,000
5	April, 20	Cost of Goods Sold	$80,000
		Inventory		$80,000
6	April, 24	Cash	$1,16,400
		Discount on Sales ($ 120,000 X 3%)	$3,600
		Account Receivable - XYZ Ltd.		$1,20,000