Question

On June 5, a company purchases 280 units of inventory on account for $28 each. After closer examination, the company determines 30 units are defective and returns them to its supplier for full credit on June 9. All remaining inventory is sold on account on June 16 for $51 each.

Required:Record transactions for the purchase, return, and sale of inventory assuming the company uses a perpetual inventory system.

Answer 1

June 5, 202x, 280 units purchased on account

Dr Merchandise inventory 7,840

Cr Accounts payable 7,840

280 units x $28 per unit = $7,840

June 9, 202x, 30 defective units are returned

Dr Accounts payable 840

Cr Merchandise inventory 840

30 units returned, so accounts payable decreases by 30 x $28 = $840

June 16, 250 units sold on account

Dr Accounts receivable 12,750

Cr Sales revenue 12,750

Dr Cost of goods sold 7,000

Cr merchandise inventory 7,000

250 units sold at $51 = $12,750

COGS = 250 units x $28 = $7,000