Question

On June 3, 2019, Hunt Company sold to Ann Mount merchandise having a sales price of $8,000 (cost $6,000) with terms of n/60, f.o.b. shipping point. Hunt estimates that merchandise with a sales value of $800 will be returned. An invoice totaling $120 was received by Mount on June 8 from Olympic Transport Service for the freight cost. Upon receipt of the goods, on June 8, Mount returned to Hunt $300 of merchandise containing flaws. Hunt estimates the returned items are expected to be resold at a profit. The freight on the returned merchandise was $24, paid by Hunt on June 8. On July 16, the company received a check for the balance due from Mount. No further returns are expected. Prepare journal entries for Hunt Company to record all the events in June and July.

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

1. Account Receivable Dr, $8,000

To Sales Revenue $8,000

(Being credit sales is recorded)

2. Cost Of Goods Sold Dr, $6,000

To Inventory $6,000

(Being Cost of goods sold is recorded)

3. Sales return and allowance Dr, $300

To Account Receivable $300

(Being sales returns is recorded)

4. Inventory $25

(300 × $6,000 ÷ $8,000)

(300 × 75%)

To Cost Of Goods Sold $225

(Being Cost of goods sold is recorded)

5. Freight (Expense) Dr, $24

To Cash $24

(Being freight paid is recorded)

6. Cash Dr, $7,700

($8,000 - $300)

Accounts Receivables Dr, $7,700

(Being collection of accounts receivables is recorded)