Question

Prepare journal entries to record the following merchandising transactions of Margin Company which applies the perpetual inventory system and the gross method of recording invoices. Margin Company offers all of its credit customers credit terms of 2/10,n/30. May 1 Purchased merchandise from Craft Company for $7,800 under credit terms of 1/10, n/30, FOB shipping point, invoice dated May 1. May 2 Purchased merchandise from Bow Company for $10,600 under credit terms 2/05. n/20, FOB destination May 3 Sold merchandise to Sting Company for $5,600,FOB shipping point, invoice dated May 4. The merchandise had cost $3,000. May 4 Paid $300 cash for the freight charges on the May 1 purchase of merchandise. May 5 Received an $800 credit memorandum from Craft Company for the return of part of the merchandise purchased on May 1. May 6 Paid Bow Company the balance due within the discount period. May 8 Sold merchandise to Skeet Company for $3,300, FOB shipping point, invoice dated May 8. The merchandise had a cost of $1,500. May 11 Pald Craft Company the balance due within the discount period. May 13 Received the balance due from Sting Company within the discount period. May 14 Issued a credit $300 credit memorandum to Skeet Company for an allowance on defective merchandise.

Answer 1

SOLUTION:

Date	Particulars	Debit	Credit
May-01	Inventory	7,800
	Accounts Payable - Craft Company		7,800
May-02	Inventory	10,600
	Accounts Payable - Bow Company		10,600
May-04	Accounts Receivable - Sting Company	5,600
	Sales		5,600
	Cost of goods sold	3,000
	Inventory		3,000
	Inventory	300
	Cash		300
May-05	Accounts Payable - Craft Company	800
	Inventory		800
May-06	Accounts Payable - Bow Company	10,600
	Cash		10,388
	Inventory ($10,600*2%)		212
May-08	Accounts Receivable - Skeet Company	3,300
	Sales		3,300
	Cost of goods sold	1,500
	Inventory		1,500
May-11	Accounts Payable - Craft Company	7,000
	Cash		6,930
	Inventory ($7,000*1%)		70
	Cash	5,488
	Discount	112
	Accounts Receivable - Sting Company		5,600
May-14	Sales Return	300
	Accounts Receivable - Skeet Company		300
May-17	Cash	2,940
	Discount	60
	Accounts Receivable - Sting Company		3,000