Merchandising Operations and the Accounting Cycle - Pearson

236 Part One The Basic Structure of Accounting
June 22 Received merchandise returned from the customer from the June 18 sale,
$800 (cost, $480). Merchandise was the wrong size.
24 Borrowed money from the bank to take advantage of the discount offered
on the June 15 purchase. Signed a note payable to the bank for the
net amount.
24 Paid supplier for goods purchased on June 15, less all discounts.
28 Received cash in full settlement of the account from the customer who
purchased inventory on June 18.
29 Paid the amount owed on account from the purchase of June 3, less the
June 9 return.
30 Purchased inventory for cash, $900, less a quantity discount of $35.
Required
1. Journalize the transactions above. Explanations are not required.
2. Set up T-accounts and post the journal entries to show the ending balances in
the Inventory and Cost of Goods Sold accounts.
3. Assume that the note payable signed on June 24 requires the payment of $95
interest expense. Was the decision to borrow funds to take advantage of the cash
discount wise or unwise?
Solution to Review Problem
Requirement 1
Note: To save space, calculations have been included in the journal entries. Normally,
they would be included in the explanations and space would be left between each
journal entry.
June 3 Inventory ...................................................................... 1,610
Accounts Payable .................................................. 1,610
9 Accounts Payable ($1,610 × 0.40) ............................. 644
Inventory .............................................................. 644
12 Cash............................................................................... 920
Sales Revenue......................................................... 920
12 Cost of Goods Sold...................................................... 550
Inventory ................................................................ 550
15 Inventory ($5,100 – $100) ........................................... 5,000
Accounts Payable ................................................. 5,000
16 Inventory ..................................................................... 260
Cash......................................................................... 260
18 Accounts Receivable .................................................. 2,000
Sales Revenue......................................................... 2,000
18 Cost of Goods Sold...................................................... 1,180
Inventory ................................................................ 1,180
22 Sales Returns and Allowances .................................. 800
Accounts Receivable ............................................. 800
22 Inventory ...................................................................... 480
Cost of Goods Sold................................................ 480
24 Cash [$5,000 – 0.03($5,000)] ....................................... 4,850
Note Payable .......................................................... 4,850
24 Accounts Payable........................................................ 5,000
Inventory ($5,000 × 0.03) ...................................... 150
Cash ($5,000 × 0.97) .............................................. 4,850
28 Cash [($2,000 – $800) × 0.98] ...................................... 1,176
Sales Discounts [($2,000 – $800) × 0.02] ................... 24
Accounts Receivable ($2,000 – $800)................... 1,200
29 Accounts Payable ($1,610 – $644) ............................. 966
Cash......................................................................... 966
30 Inventory ($900 – $35) ................................................ 865
Cash......................................................................... 865