Question

Gamegirl Inc., has the following transactions during August. August 6 Sold 58 handheld game devices for $140 each to DS Unlimited on account, terms 2/10, net 60. The cost of the 58 game devices sold, was $120 each. August 10 DS Unlimited returned three game devices purchased on 6th August since they were defective. August 14 Received full amount due from DS Unlimited. Required: Prepare the transactions for GameGirl, Inc., assuming the company uses a perpetual inventory system. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

On August 6,

1. Debit Cost of goods sold $6,960

Credit Handheld game devices $6,960

2. Debit Receivable Accounts $8,120

Credit Sales $8,120

On August 10,

1. Debit Handheld game devices $360

Credit Cost of goods sold $360

2. Debit Sales $420

Credit Receivable Accounts $420

On August 14,

Debit Cash $7,546

Debit Sales Discount $154

Credit Receivable Accounts $7,700

Step-by-step explanation:

On August 6, when Gamegirl Inc., sold handheld game devices, the following entries were made:

1. Debit Cost of goods sold $6,960

Credit Handheld game devices $6,960

2. Debit Receivable Accounts $8,120

Credit Sales $8,120

On August 10,

1. Debit Handheld game devices $360

Credit Cost of goods sold $360

2. Debit Sales $420

Credit Receivable Accounts $420

Credit terms of 2/10, n/60 means that 2% discount for the payment within 10 days and the full amount to be paid within 60 days.

On August 14, DS Unlimited pays and takes the appropriate discount:

2% x ($8,120 - $420) = $154

Cash GameGirl, Inc., receives: $8,120 - $420 - $154 = $7,546

The journal entry that GameGirl, Inc., makes:

Debit Cash $7,546

Debit Sales Discount $154

Credit Receivable Accounts $7,700