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 0 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 $897,900 of merchandise to Pharoah Company on account, terms 2/10, n/30. The cost of the merchandise sold was $594,200.
(b)		On March 6, Pharoah Company returned $100,900 of the merchandise purchased on March 2. The cost of the merchandise returned was $67,500.
(c)		On March 12, Shamrock Company received the balance due from Pharoah Company.

Answer 1

	Journal Entries - Perpetual Inventory System - Pharoah Company's Books
	Date	Account Titles and Explanations	Debit	Credit
a)	Mar. 2	Inventory	$897,900
		Accounts Payable - Shamrock Company		$897,900
		(To record the purchase of merchandise inventory on account)
b)	Mar. 6	Accounts Payable - Shamrock Company	$100,900
		Inventory		$100,900
		(To record the return of merchandise inventory purchased on account)
c)	Mar. 12	Accounts Payable - Shamrock Company ($897,900 - $100,900)	$797,000
		Purchase Discount ($797,000*2/100)		$15,940
		Cash ($797,000 - $15,940)		$781,060
		(To record the payment of accounts payable within discount period)