Question

Kate Company uses a perpetual inventory system.

Record the journal entries for the following transactions:

a. On July 16, Kate sold $1,200 of merchandise with terms of 2/10, n/30. The cost of the merchandise was $720.
b. On July 19, the customer returned $200 of the merchandise from (a). The cost of the merchandise was $120.
c. On July 22, the customer paid the entire balance due to Kate.

Answer 1

The journal entries are as follows:

(a) On July 16,

Account receivable A/c Dr. $1,200

To sales revenue $1,200

(To record Sales)

Cost of goods sold A/c Dr. $720

To Inventory $720

(To record cost of goods sold)

(b) On July 19,

Sales return and allowance a/c Dr. $200

To Account receivable $200

(To record sales return)

Inventory A/c Dr. $120

To Cost of goods sold $120

(To record cost of goods return)

(c) On July 22,

Cash (1,000 × 98%) A/c Dr. $980

Sales discount A/c Dr. $20

To Account receivable $1,000

(To record amount received)