Question

For the following purchasing and sales transactions, prepare the appropriate journal entry assuming a perpetual inventory system is in place.

1. On January 1, Cougar Corp. purchased inventory from a supplier for $6,500. The credit terms on the transaction are 1/10, net 30.
2. On January 2, Cougar Corp. paid a shipping company $110 for freight associated with the January 1 purchase.
3. On January 5, Cougar Corp sold inventory with a cost of $2,600 for $3,700. The credit terms on the transaction are 2/15, net 30.
4. On January 6, Cougar Corp. returned $950 of the inventory purchased on January 1.
5. On January 7, Cougar Corp. paid $210 to ship the goods sold on January 5.
6. On January 9, Cougar Corp. paid for the purchase on January 1. (Don't forget to consider the purchase return on January 6).
7. On January 10, Cougar Corp. received payment for the sale made on January 5.

Answer 1

Cougar Corp.

Journal Entries

1. Jan. 1:

Debit Inventory $6,500

Credit Accounts payable $6,500

To record the purchase of inventory on account, credit terms 1/10, net 30.

2. Jan. 2:

Debit Freight-in $110

Credit Cash $110

To record the freight for January 1 purchase.

3. Jan. 5:

Debit Accounts receivable $3,700

Credit Sales Revenue $3,700

To record the sale of goods on account, credit terms, 2/15, net 30.

Debit Cost of Goods Sold $2,600

Credit Inventory $2,600

To record the cost of goods sold.

4. Jan. 6:

Debit Accounts Payable $950

Credit Inventory $950

To record the return of goods on account.

5. Jan. 7:

Debit Freight-out $210

Credit Cash $210

To record the payment for freight for goods sold.

6. Jan. 9:

Debit Accounts Payable $5,550

Credit Cash $5,494

Credit Cash Discounts $56

To record the payment on account.

7. Jan. 10:

Debit Cash $3,626

Debit Cash Discounts $74

Credit Accounts Receivable $3,700

To record the receipt of cash on account.

Step-by-step explanation:

a) Data and Analysis:

1. Jan 1: Inventory $6,500 Accounts Payable $6,500

2. Jan. 2: Freight-in $110 Cash $110

3. Jan. 5: Accounts Receivable $3,700 Sales Revenue $3,700

4. Jan.6: Accounts payable $950 Inventory $950

5. Jan. 7: Freight-out $210 Cash $210

6. Jan. 9: Accounts Payable $5,550 Cash $5,494 Cash Discounts $56

7. Jan. 10: Cash $3,626 Cash Discounts $74 Accounts Receivable $3,700