The following transactions occurred in a merchandising business that was incorporated in the...

Question:

The following transactions occurred in a merchandising business that was incorporated in the month of October. The numbers beside the transactions represent the day of the month the transaction occurred. The company is using a sales price per unit of $10. Assume the company uses FIFO as its cost flow assumption. There are no discounts (for sales or purchases) in this problem.

1. Prepare an appropriate journal entry for each of the following transactions:

1 The organization issued 2,000 shares of $10 par value common stock, they received $40,000 in cash.
1 Purchased 300 units of inventory on account, $3.50 per unit.
1 Paid cash to overnight ship the inventory, $450 total.
2 Purchased a building with land for the business with Periodic Payment Note, 20 year, 6%. In addition to the purchase price of $150,000, renovations to the building were including in the Note amount, the renovation cost $25,000. The land and building were independently appraised at $50,000 and $150,000, respectively.
2 Paid cash for the on account purchase of inventory (300 units on 10/1).
2 Office supplies were purchased from Office Supply Store on account - $550
3 Purchased 150 units of inventory on account, $3.50 per unit.
3 Paid cash to ship inventory (3-day shipping), $150 total.
3 Sold 320 products to customers on account, sales price of $10 per unit. (Determine the cost of products based on inventory purchases and any related transactions.)
4 Office furniture was purchased with a 2 year Periodic Interest - Lump Sum Principle Note, 12% annual interest, payable semi-annually - $5,750
5 Sold 75 products to customers for cash.
5 Purchased 250 units of inventory on account, negotiated a quantity discount - $3.25.
5 Paid cash to ship inventory (3-day shipping), $250.
6 Paid off all inventory account purchases (150 units on 10/3 & 250 units on 10/5).
7 Received cash for previous sale on account (320 units on 10/3).
7 Sold 120 products to customers on account
9 Sold 100 products to a customer for cash.
15 Received cash for previous sale on account (120 units on 10/7)
15 Paid employees with cash, Gross - $2,100. Federal and State withholdings, 15% and 5%, respectively. FICA 7.65%. Employer payroll taxes include FUTA - .8%, SUTA - 5.4%, FICA match - 7.65%.
16 Purchased 350 units of inventory on account, negotiated a quantity discount - $3.40. Paid cash to ship inventory (5-day), $175.
20 Sold 220 products to a customer on account.
26 Paid Office Supply Store (10/2) - $550
28 Sold 100 products to a customer for cash.
29 Sold 50 products to a customer on account.
30 Paid employees with cash, Gross - $2,100. Federal and State withholdings, 15% and 5%, respectively. FICA 7.65%. Employer payroll taxes include FUTA - .8%, SUTA - 5.4%, FICA match - 7.65%.

Recording Transactions In The General Journal:

In bookkeeping, the general journal can be used to record all transactions an entity enters into, including sales, purchases, the payment of expenses, and for the various adjusting entries.

Answer and Explanation: 1


We will assume the company uses the perpetual inventory system.

Date Description Debit Credit
Oct 1 DR Cash $40,000
CR Common Stock $20,000
CR Additional Paid-In Capital $20,000
To record the issue of 2,000 shares
Oct 1 DR Inventory $1,050
CR Accounts Payable $1,050
To record 300 units of inventory @ $3.50 each
Oct 1 DR Inventory $450
CR Cash $450
To record freight for inventory paid
Oct 2 DR Land at cost $50,000
DR Building at cost $175,000
CR Notes Payable $225,000
To record the purchase of a building and renovations to it by issuing a Periodic Payment Note
Oct 2 DR Accounts Payable $1,050
CR Cash $1,050
To record a payment to a supplier
Oct 2 DR Supplies on hand $550
CR Accounts Payable $550
To record the purchase of office supplies on account
Oct 3 DR Inventory $525
CR Accounts Payable $525
To record 150 units of inventory @ $3.50 each
Oct 3 DR Inventory $150
CR Cash $150
To record freight for inventory paid
Oct 3 DR Accounts Receivable $3,200
CR Sales revenue $3,200
To record the sale of 320 units to a customer on account
Oct 3 DR Cost of Goods Sold $1,590
($5 for 300 units and $4.50 for 20 units, freight incl)
CR Inventory $1,590
To record the cost of goods sold to a customer
Oct 4 DR Office Furniture at cost $5,750
CR Note Payable $5,750
To record the purchase of office furniture with a 2-year Periodic Interest - Lump Sum Principle Note
Oct 5 DR Accounts Receivable $750
CR Sales revenue $750
To record the sale of 75 units to a customer on account
Oct 5 DR Cost of Goods Sold $337.50
($4.50 per unit freight incl)
CR Inventory $337.50
To record the cost of goods sold to a customer
Oct 5 DR Inventory $812.50
CR Accounts Payable $812.50
To record 250 units of inventory @ $3.25 each
Oct 5 DR Inventory $250
CR Cash $250
To record freight for inventory paid
Oct 6 DR Accounts Payable $1,339.50
CR Cash $1,339.50
To record a payment to suppliers
Oct 7 DR Cash $3,200
CR Accounts Receivable $3,200
To record receipt from customer
Oct 7 DR Accounts Receivable $1,200
CR Sales revenue $1,200
To record the sale of 120 units to customers on account
Oct 7 DR Cost of Goods Sold $523.75
($4.50 x 55 units + $4.25 x 65 units)
CR Inventory $523.75
To record the cost of goods sold to a customer
Oct 9 DR Cash $1,000
CR Sales revenue $1,000
To record the sale of 100 units to customers for cash
Oct 7 DR Cost of Goods Sold $425
($4..25 x 100 units)
CR Inventory $425
To record the cost of goods sold to a customer
Oct 15 DR Cash $1,200
CR Accounts Receivable $1,200
To record receipt fro customer
Oct 15 DR Salaries Expense $2,100
DR Payroll Taxes Expense $290.85
CR Cash $1,519.35
CR Federal and State taxes Payable $420
CR FICA Taxes Payable $321.30
CR FUTA Payable $16.80
CR SUTA Payable $113.40
To record salary expense and related payroll taxes
Oct 16 DR Inventory $1,190
CR Accounts Payable $1,190
To record 350 units of inventory @ $3.40 each
Oct 16 DR Inventory $175
CR Cash $175
To record freight for inventory paid
Oct 20 DR Accounts Receivable $2,200
CR Sales revenue $2,200
To record the sale of 220 units to customers on account
Oct 20 DR Cost of Goods Sold $887.75
($4.25 x 85 units + $3.90 x 135 units)
CR Inventory $887.75
To record the cost of goods sold to a customer
Oct 26 DR Accounts Receivable $550
CR Cash $550
To record payment to the office supply store
Oct 29 DR Accounts Receivable $500
CR Sales revenue $500
To record the sale of 50 units to customers on account
Oct 29 DR Cost of Goods Sold $195
($3.90 x 50 units)
CR Inventory $195
To record the cost of goods sold to a customer
Oct 30 DR Salaries Expense $2,100
DR Payroll Taxes Expense $290.85
CR Cash $1,519.35
CR Federal and State taxes Payable $420
CR FICA Taxes Payable $321.30
CR FUTA Payable $16.80
CR SUTA Payable $113.40
To record salary expense and related payroll taxes

Learn more about this topic:

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Recording Sales Using the Perpetual System

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Chapter 6 / Lesson 8
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Each transaction that occurs in a business has an impact on at least two or more accounts. Because of that, recording transactions is essential. In this lesson, you will learn about recording sales transactions using the perpetual inventory system.


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