Question

Prepare the necessary journal entries to record the following transactions, assuming Eustace Company uses a perpetual inventory system.

(a) Eustace sells $45,000 of merchandise, terms 1/10, n/30. The merchandise cost $30,000.
(b) The customer in (a) returned $4,000 of merchandise to Eustace. The merchandise returned cost $2,400.
(c) Eustace received the balance due within the discount period.

Answer 1

The necessary journal entries to record the transactions, along with the merchandise and current account balances.

Step-by-step explanation:

Journal Entries:

(a) Record the sale:

Accounts Receivable ............................. $45,000

Sales Revenue .................................... $45,000

Cost of Goods Sold .............................. $30,000

Merchandise Inventory ........................ $30,000

(b) Record the merchandise return:

Sales Returns and Allowances .............. $4,000

Accounts Receivable ............................. $4,000

Merchandise Inventory .......................... $2,400

Cost of Goods Sold ............................... $2,400

(c) Record the payment:

Accounts Receivable ............................. $40,050

Sales Discounts ................................... $950

Cash .................................................... $39,100

Merchandise Balance: $28,600

Current Account Balance: $39,100

Answer 2

Step-by-step explanation:

The journal entries are shown below:

a. Accounts receivable A/c Dr $45,000

To Sales revenue A/c $45,000

(Being merchandise sold on credit)

Cost of goods sold A/c Dr $30,000

To Merchandise inventory A/c $30,000

(Being merchandise sold on cost)

b. Sales return and allowance A/c Dr $4,000

To Accounts receivable $4,000

(Being sales return is recorded)

Merchandise inventory A/c Dr $2,400

To Cost of goods sold A/c $2,400

(Being sales return is recorded)

c. Cash A/c Dr $40,590

Sales Discount A/c Dr $410

To Accounts receivable $41,000

(Being cash received recorded)

The computation of the account receivable

= Credit sales - returned goods

= $45,000 - $4,000

= $41,000

And, the discount would be

= Accounts receivable × percentage given

= $41,000 × 1%

= $410

The remaining amount would be credited to the cash account.