Question

The Jewel Box purchases jewellery from around the world and sells to local retailers in Canada. Prepare general journal entries to record the following perpetual system merchandising transactions of The Jewel Box. Use a separate account for each receivable and payable; for example, record the purchase on August 1 in Accounts Payable—Luu Company. Aug 1 Purchased necklaces from Luu Company for $4,000 under credit terms of 1/10, n/30, FOB destination. Aug 4 At Luu Company's request, paid $350 for freight charges on the August 1 purchase, reducing the amount owed to Luu. Aug 5 Sold rings to Green Ruby for $3,800 under credit terms of 2/10, n/60, FOB destination. The merchandise had cost $2,470. Aug 8 Purchased bracelets from Jane Co. for $5,200 under credit terms of 1/10, n/45, FOB shipping point. Aug 9 Paid $325 shipping charges related to the August 5 sale to Green Ruby. Aug 10 Green Ruby returned the rings purchased from the August 5 sale that had cost $440 and been sold for $800. The merchandise was restored to inventory. Aug 12 After negotiations with Jane Co. concerning problems with the merchandise purchased on August 8, received a credit memo from Jane granting a price reduction of $400. Aug 15 Received balance due from Green Ruby for the August 5 sale. Aug 17 Purchased office equipment from WestCo on credit, $6,000, n/45. Aug 18 Paid the amount due Jane Co. for the August 8 purchase. Aug 19 Sold earrings to Chic Jewellery for $1,800 under credit terms of 1/10, n/30, FOB shipping point. The merchandise had cost $990. Aug 22 Chic Jewellery requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Sent Chic Jewellery a credit memo for $300 to resolve the issue. Aug 29 Received Chic Jewellery’s payment of the amount due from the August 19 purchase. Aug 30 Paid Luu Company the amount due from the August 1 purchase.

Answer 1

General journal entries for The Jewel Box's merchandising transactions would include details of purchases, sales, returns, freight and shipping charges, price reductions, and payments. These records are crucial for maintaining the merchandise balance and tracking the current account balance.

Step-by-step explanation:

To record the perpetual inventory system merchandising transactions for The Jewel Box, you will need to make a series of general journal entries. Each transaction affects different accounts and should be recorded on the date the transaction occurs.

The use of general ledgers such as Accounts Payable and Accounts Receivable specific to each company involved is essential for organizational and tracking purposes.

• August 1: Purchased necklaces on credit from Luu Company.
• August 4: Paid freight charges for the August 1 purchase.
• August 5: Sold rings on credit to Green Ruby.
• August 8: Purchased bracelets on credit from Jane Co.
• August 9: Paid shipping charges for the August 5 sale to Green Ruby.
• August 10: Green Ruby returned rings from the August 5 sale.
• August 12: Received a price reduction credit from Jane Co.
• August 15: Received payment from Green Ruby for the August 5 sale.
• August 17: Purchased office equipment on credit from WestCo.
• August 18: Paid Jane Co. for the August 8 purchase.
• August 19: Sold earrings on credit to Chic Jewellery.
• August 22: Provided a price reduction to Chic Jewellery.
• August 29: Received payment from Chic Jewellery for the August 19 purchase.
• August 30: Paid Luu Company for the August 1 purchase.

The merchandise balance refers to the cost of the merchandise currently in inventory, while the current account balance represents the total amount owed or owed to the company by others at any given point in time.