Question

mann stores returned goods that had been billed orifinally at 800

263 Chapter 5 Accounting for Merchandising Operations $410,000 of sales on account still eligible for the percent discount at year-end and believes that all companies will pay within the discount period. Additionally Butler allows a 90-day return privice for the merchandiselt sells. At year-end, Butler estimates sales of $1.200.000 (with a cost to utro $480,000) remain that are still within the 90-day return neried. From past experience, 6 percent of this merchandise is expected to be returned. Prepare the neriod end adiusting journal entries needed for Butler Corporation to comply with the new revenue recognition standard. Butler Corporation's fiscal year-end is December 31. BLEMS-SET A x Journal Entries for Merchandise Transactions on Seller's and Buyer's Books Perpetual System L02, 3 The following transactions occurred between the Decker Company and Mann Stores, Inc., during March: Mar. 8 Decker sold $14,000 worth of merchandise ($9,600 cost) to Mann Stores with terms of 2/10, n/30. 10 Mann Stores paid freight charges on the shipment from Decker Company, $500. 12 Mann Stores returned $2,000 of the merchandise ($1,600 cost) shipped on March 8. 17 Decker received full payment for the net amount due from the March 8 sale. 20 Mann Stores returned goods that had been billed originally at $800 ($600 cost). Decker issued a check for $784. quired are the necessary iournal entries for all the hooks of Decker Camnany and (h) the heaks of Mann

Answer 1

	In the books of Decker:
	Date	Account titles and explanation					Debit	Credit
	Mar 8.	Accounts receivable					14000
		Sales revenue						14000
		(Sales revenue recorded)
		Cost of goods sold					9600
		Merchandise inventory						9600
		(Cost of goods sold recorded)
	Mar 10.	No entry
		(Since the freight is paid by the buyer)
	Mar 12.	Sales returns and allowances					2000
		Accounts receivable						2000
		(Inventory returned by the buyer)
		Merchandise inventory					1600
		Cost of goods sold						1600
		(Cost of goods sold reversed)
	Mar 17.	Cash			(12000-240)		11760
		Sales discount			(12000*2%)		240
		Accounts receivable						12000
		(Since the cash received within 10 days,eligible
		for 2% discount)
	Mar 20.	Sales returns and allowances					800
		Sales discount			(plug)			16
		Cash						784
		(Cash refund for goods returned)
		Merchandise inventory					600
		Cost of goods sold						600
		(Cost of goods sold reversed)
	In the books of Mann:
	Date	Account titles and explanation					Debit	Credit
	Mar 8.	Merchandise inventory					14000
		Accounts payable						14000
		(Inventory purchased on credit)
	Mar 10.	Merchandise inventory					500
		Cash						500
		(Freight charges paid)
	Mar 12.	Accounts payable					2000
		Merchandise inventory						2000
		(Inventory returned to seller)
	Mar 17.	Accounts payable					12000
		Merchandise inventory			(12000*2%)			240
		Cash			(12000-240)			11760
		(Cash paid to seller with discount)
	Mar 20.	Cash					784
		Merchandise inventory						784
		(Cash refund availed on return)