Answer along with its Explanation:
Journal entry to record the credit purchase of the 100 inventory units would be increase in inventory and accounts payables as under:
Dr Inventory Purchases $3,240
Cr Accounts Payables $3,240
The journal entry to record the purchase return is the reversal of the inventory purchases and will be with purchase value of 20 inventory units at $18 per unit. The transaction is given as under:
Dr Accounts Payables $360
Cr Inventory Purchases $360
The entry to record the sale of the inventory would be in two steps and are given as under:
Step 1: Record the increase in Credit Sales, which will also increase the accounts receivables and the sale value $31 per unit will be used.
Dr Accounts Receivables $4,960
Cr Revenue Account $4,960
Step 2: Record the decrease in inventory as the asset after sale would be no more in the inventory so the cost of this inventory would be reduced to zero, which will be allocated to cost of goods sold.
Dr Cost of Goods Sold $2,880
Cr Inventory Account $2,880
