Merchandising Transactions: Perpetual Inventory System Record in T account form
ID: 2370038 • Letter: M
Question
Merchandising Transactions: Perpetual Inventory System Record in T account form the Sarah Company engaged in the following transactions in July 2010:
July 1 Sole merchandise to Tobom Company on credit, terms n/30, FOB shipping
Point, $2,100 (cost, 1,260).
3 Purchased merchandise on credit from VP Company, terms n/30, FOB
Shipping point $3,800.
5 Paid Speed Freight for freight charges on merchandise received, $290
8 Purchased merchandise on credit on credit from Expo Supply Company,
terms n/30, FOB shipping point, $3,600, which includes $200 freight cost
Paid by Expo Supply Company.
12 Returned some of the merchandise purchased on July 3 for credit, $600
15 Sole merchandise on credit to Tom Gogas, terms n/30, FOB shipping point,
$1,200(cost, $720).
17 Sole merchandise for cash, $1,000 (cost, $600)
18 Accepted for full credit a return from Chi Bong and returned merchandise
to Inventory, $200 (cost, $120).
24 Paid Angel VP Company for purchase of July 1 purchase less return
Of July 12.
35 Received the check from Chi Bong for July purchase less the return on July
Required:
1. Prepare entries in journal form to record the transactions, assuming use of the perpetual inventory system.
2. Most Companies call the first line of the income statement net sales. Other r companies call it sales. Do you think these teams are equivalent and comparable? What would the content of net sales? Why might a company use sales instead of net sales?
Explanation / Answer
July 1 Acct Rxable Dr 2100 Sales Revenue Cr 2100 Jul 1 Cost of goods sold Dr 1260 Merchandise inventory Cr 1260 (Sold merchandise on credit to Tobom, recorded COGS also) Jul 3 Merchandise inventory Dr 3800 Acct Payable Cr 3800 (Purchased merchandise on credit from VP Company, terms n/30, FOB Shipping point). Jul 5 Freight Exp Dr 290 Cash Cr 290 (Paid Speed Freight for freight charges on merchandise received) Jul 8 Merchandise inventory Dr 3400 Freight Exp Dr 200 Acct Payable Cr 3600 (Purchased merchandise on credit on credit from Expo Supply Company, terms n/30, FOB shipping point. Freight cost will be reimbursed to Expo Supply Company.) Jul 12 Acct Payable Dr 600 Merchandise inventory Cr 600 (Returned some of the merchandise purchased on July 3 for credit) Jul 15 Acct Rxable Dr 1200 Sales Revenue Cr 1200 Jul 15 Cost of goods sold Dr 720 Merchandise inventory Cr 720 (Sole merchandise on credit to Tom Gogas, terms n/30, FOB shipping point) Jul 17 Cash Dr 1000 Sales Revenue Cr 1000 Jul 17 Cost of goods sold Dr 600 Merchandise inventory Cr 600 (Sole merchandise for cash) Jul 18 Sales Revenue Cr 200 Acct Rxable Dr 200 Jul 18 Merchandise inventory Dr 120 Cost of goods sold Cr 120 (Accepted for full credit a return from Chi Bong and returned merchandise to Inventory) Jul 24 Acct Payable Dr 3200 Cash Cr 3200 (Paid Angel VP Company for purchase of July 3 purchase (3800) less return Of July 12 (600)). Jul 25 Cash Dr Acct Rxable Cr (Received the check from Chi Bong for July purchase less the return (200) on July) Note : Here Sale figure to Chi Bong is not shown in the data given. Hence I am showing the template for Journal entry. Only Sales Return of $200 is given in data.) (b) Gross sales are the sum of all sales during a time period. Gross sales do not normally appear on an income statement. Net sales are gross sales minus sales returns, sales allowances, and sales discounts. The sales figures reported on an income statement are net sales. Revenue or Sales reported on the income statement are net sales after deducting Sales Returns and Allowances and Sales Discounts. A company may use Sales instead of Net Sales if it wants to show higher Gross profit & thus higher Net income