Question

Flint Company buys merchandise on account from Windsor, Inc.. The selling price of the goods is $1,050, and the cost of the goods is $660. Both companies use perpetual inventory systems.

Required:
Journalize the transaction on the books of both companies.

Answer 1

Answer and Explanation:

The journal entries are shown below:

On the books of Flint Company

Merchandise Inventory $1,050

Accounts payable $10,50

(Being Merchandise purchased on account is recorded)

For recording this we debited the inventory as it increased the assets and credited the account payable as it is also increased the liabilities

On the books of Windsor Inc. Company

Accounts Receivable $1,050

To Sales $1,050

(Being Merchandise sold on account is recorded)

For recording this we debited the account receivable as it increased the assets and credited the sales as it also increased the sales

Cost of goods sold $660

To Merchandise inventory $660

(Being the cost of merchandise is recorded)

For recording this we debited the cost of goods sold as it increased the expenses and credited the inventory as it decreased the assets