Question

DS Unlimited has the following transactions during August.

August 6
Purchases 50 handheld game devices on account from GameGirl, Inc., for $ 100 each, terms 1/10, n/60.
August 7
Pays $300 to Sure Shipping for freight charges associated with the August 6 purchase.
August 10
Returns to GameGirl five game devices that were defective.
August 14
Pays the full amount due to GameGirl.
August 23
Sells 30 game devices purchased on August 6 for $120 each to customers on account. The total cost of the 30 game devices sold is $3,170.
Required:
Record the transactions of DS Unlimited, assuming the company uses a perpetual inventory system.

Answer 1

See the journal entries below.

Step-by-step explanation:

The journal entry will look as follows:

Date Account and explanation Debit ($) Credit ($)

Aug 6 Inventory (50 * $100) 5,000

Account payable 5,000

(To record inventory purchased on account.)

Aug 7 Inventory 300

Cash 300

(To record payment of freight charges associated with the August 6 purchase.)

Aug 10 Account payable (5 * $100) 500

Inventory 500

(To record the returns of defective five game devices to GameGirl.)

Aug 14 Account payable (w.1) 4,500

Cash (balancing figure) 4,455

Inventory (w.2) 45

(To record the payment of the full amount due to GameGirl.)

Aug 23 Account receivable (30 * $120) 3,600

Sales revenue 3,600

Cost of goods sold 3,170

Inventory 3170

(To record the Sales and cost of 30 game devices purchased on August 6.)

Workings:

w.1. Account payable = Purchases on account on August 6 - Defective inventory returned on August 10 = $5,000 - $500 = $4,500

w.2. Inventory = Discount received on account payable for paying within 10 days = w.1 * 1% = $4,500 * 1% =$45