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August 6 Purchases 78 handheld game devices on account from GameGirl, Inc., for $240 each, terms 1/10, n/60. August 7 Pays $440 to Sure Shipping for freight charges associated with the August 6 purchase. August 10 Returns to GameGirl eight-game devices that were defective. August 14 Pays the full amount due to GameGirl. August 23 Sells 58 game devices purchased on August 6 for $260 each to customers on account. The total cost of the 58 game devices sold is $14,145.37. Record the transactions of DS Unlimited, assuming the company uses a perpetual inventory system.

User Weibo Li
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2 Answers

5 votes

Final answer:

DS Unlimited made several transactions within August, including purchasing and selling handheld game devices, paying freight charges, returning defective devices, and availing of a cash discount. These transactions must be recorded promptly in a perpetual inventory system to reflect the cost of inventory, sales revenue, and expenses accurately.

Step-by-step explanation:

The student is inquiring about recording multiple transactions for DS Unlimited, which includes purchases, sales, returns, and the associated freight charges. Working within a perpetual inventory system, each transaction must be recorded in the accounting records when they occur.

August 6: DS Unlimited purchases 78 handheld game devices for $240 each on account from GameGirl, Inc., with terms 1/10, n/60. This results in a purchase of $18,720 (78 devices x $240 each) and a potential discount if paid within 10 days.

August 7: DS Unlimited pays $440 to Sure Shipping for freight charges, which is added to the cost of inventory.

August 10: DS Unlimited returns 8 defective game devices, which reduces the inventory by the cost of the 8 devices ($1,920).

August 14: DS Unlimited pays the remaining amount after returning defective products and deducting the cash discount offered. Since they are paying within the discount period, they will pay $18,720 - $1,920 (returns) - $168 (1% cash discount on $16,800). The total payment is $16,632.

August 23: DS Unlimited sells 58 game devices for $260 each to customers on account. The sales revenue generated is $15,080 (58 devices x $260 each), and the cost of the goods sold is $14,145.37, which will be recorded separately.

User Birol Kuyumcu
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6.6k points
2 votes

Answer:

The transactions will be recorded as follows;

Step-by-step explanation:

August 6.

Inventory(78*240)*99% Dr.$18,533

Accounts Payable-Game Girl Cr.$18,533

August 7.

Inventory Dr.$440

Bank Cr.$440

Aug 10.

Accounts Payable-Game Girl (8*240)*99% Dr.$1,904

Inventory Cr.$1,904

August 14.

Accounts Payable($18,533-$1,904) Dr.$16,632

Bank Cr.$16,632

August 23.

Account Receivable (58*260) Dr.$15,080

Sales Revenue Cr.$15,080

Cost of Goods Sold Dr.$14,145

Inventory Cr.$14,145

Please note that cash discount's net method is used for sake of recording

User Ibrar Ahmed
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