Question

Following are the merchandising transactions of Dollar Store.

Nov. 1 Dollar Store purchases merchandise for $2,200 on terms of 2/5, n/30, FOB shipping point, invoice dated November 1.
5 Dollar Store pays cash for the November 1 purchase.
7 Dollar Store discovers and returns $200 of defective merchandise purchased on November 1, and paid for on November 5, for a cash refund.
10 Dollar Store pays $110 cash for transportation costs for the November 1 purchase.
13 Dollar Store sells merchandise for $2,376 with terms n/30. The cost of the merchandise is $1,188.
16 Merchandise is returned to the Dollar Store from the November 13 transaction. The returned items are priced at $295 and cost $148; the items were not damaged and were returned to inventory.

Required:
Journalize the above merchandising transactions for the Dollar Store assuming it uses a perpetual inventory system and the gross method.

Answer 1

Answer and Explanation:

The Journal entries are given below:-

1. Merchandise Inventory Dr, $2,200

To Accounts Payable $2,200

(Being merchandise purchase on account is recorded)

2. Accounts Payable Dr, $2,200

Merchandise Inventory Dr, $44 ($2,200 × 2%)

To Cash $2,244

(Being cash paid is recorded)

3. Cash Dr, $196 ($200 - ($200 × 2%)

To Merchandise Inventory $196

(Being cash received is recorded)

4. Merchandise Inventory Dr, $110

To Cash $110

(Being cash paid is recorded)

5. Accounts Receivable Dr, $2,376

To Sales $2,376

(Being sales is recorded)

6. Cost of goods sold Dr, $1,188

To Merchandise Inventory $1,188

(Being cost of goods sold is recorded)

7. Sales Returns and allowances Dr, $295

To Account Receivables $295

(Being sales return is recorded)

8. Merchandise Inventory Dr, $148

To Cost of goods sold $148

(Being cost return is recorded)