Question

An inexperienced accountant for Huang Company made the following errors in recording merchandising transactions.

1. A $195 refund to a customer for faulty merchandise was debited to Sales Revenue $195 and credited to Cash $195.
2. A $180 credit purchase of supplies was debited to Inventory $180 and credited to Cash $180.
3. A $215 sales discount was debited to Sales Revenue.
4. A cash payment of $20 for freight on merchandise purchases was debited to Freight-Out $200 and credited to Cash $200.

Prepare separate correcting entries for each error, assuming that the incorrect entry is not reversed.

Answer 1

The Journal entries are as follows:

(i) Sales Returns and allowance A/c Dr. $195

To sales revenue $195

(To record the correct entry for faulty merchandise)

(ii) Supplies A/c Dr. $180

Cash A/c Dr. $180

To Account Payable A/c $180

To Merchandise Inventory A/c $180

(To record the correct entry for the purchase of supplies)

(iii) Sales Discount A/c Dr. $215

To Sales Revenue $215

(To record the sales discount)

(iv) Inventory A/c Dr. $20

Cash A/c Dr. $180

To Freight -Out $200

(To record the freight on merchandise purchases)