Question

Prepare journal entries to record the following merchandising transactions of Cabela's, which uses the perpetual inventory system and the gross method.
July 1 Purchased merchandise from Boden Company for $6,700 under credit terms of 2/15, n/30, FOB shipping point, invoice dated July 1.
2 Sold merchandise to Creek Co. for $950 under credit terms of 2/10, n/60, FOB Print shipping point, invoice dated July 2. The merchandise had cost $558.
3 Paid $125 cash for freight charges on the purchase of July 1.
8 Sold merchandise that had cost $2,000 for $2,400 cash.
9 Purchased merchandise from Leight Co. for $2,400 under credit terms of 2/15, n/60, FOB destination, invoice dated July 9.
11 Received a $400 credit memorandum from Leight Co. for the return of part of the merchandise purchased on July 9.
12 Received the balance due from Creek Co. for the invoice dated July 2, net of the discount.
16 Paid the balance due to Boden Company within the discount period.
19 Sold merchandise that cost $800 to Art Co. for $1,200 under credit terms of 2/15, n/60, FOB shipping point, invoice dated July 19.
21 Issued a $200 credit memorandum to Art Co. for an allowance on goods sold on July 19.
24 Paid Leight Co. the balance due, net of discount. 30 Received the balance due from Art Co. for the invoice dated July 19, net of discount.
31 Sold merchandise that cost $5,500 to Creek Co. for $6,900 under credit terms of 2/10, n/60, FOB shipping point, invoice dated July 31.
Perpetual Inventory System
Perpetual Inventory System requires a regular update of the merchandise inventory account for every sales and sales return transactions that were undertaken by a business. Some business owners would find it advantageous to apply this inventory system to their business because it gives the management a clear idea as to when will their goods run out-of-stock. On another hand, store owners with large quantity of inventories like grocery stores could find this system harder to implement, unless they tap modern technology.

Answer 1

Journal entries transactions of Cabela's

July 01 Dr Merchandise inventory6,700

Cr Accounts payable—Boden6,700

July 02 Dr Accounts receivable—Creek 950

Cr Sales950

July 02 Dr Cost of goods sold 558

Cr Merchandise inventory558

July 03 Dr Merchandise inventory 125

Cr Cash 125

July 08 Dr Cash2,400

Cr Sales2,400

July 08 Dr Cost of goods sold 2,000

Cr Merchandise inventoryv2,000

0July 09 Dr Merchandise inventory2,400

Cr Accounts payable—Leight2,400

July 11 Dr Accounts payable—Leight400

Cr Merchandise inventory400

July 12 Dr Cash (950-19) 931

Dr Sales discounts(2%×950) 19.00

Cr Accounts receivable—Creek950

July 16 Dr Accounts payable—Boden6,700

Cr Merchandise inventory (2%×6700) 134

Cr Cash6,566

July 19 Dr Accounts receivable—Art 1,200

Cr Sales1,200

July 19 Dr Cost of goods sold800

Cr Merchandise inventory800

July 21 Dr Sales returns and allowances200

Cr Accounts receivable—Art 200

July 24 Dr Accounts payable—Leight2,000

Cr Merchandise inventory(2%×2,000)40

Cr Cash (2,000-40) 1,960

July 30 Dr Cash (1,000-20) 980

Dr Sales discounts(2%×1000) 20

Cr Accounts receivable—Art (1,200-200) 1,000

July 31 Dr Accounts receivable—Creek6,900

Cr Sales6,900

July 31 Dr Cost of goods sold 5,500

Cr Merchandise inventory 5,500

Answer 2

Answer:

The journal entries are recorded below;

Explanation:

July 1.

1. Inventory   Dr.$6,700

  Accounts Payable Cr.$6,700

2. A/R Creek Co.    Dr.$950

   Sales Revenue   Cr.$950

Cost of Goods Sold Dr.$558

Inventory                  Cr.$558

3. inventory   Dr.$125

   Cash          cr.$125

8.  Cash          Dr.$2,400

     Sales Revenue Cr.$2,400

Cost of Goods Sold    Dr.$2,000

Inventory                     Cr.$2,000

9. Inventory      Dr.$2,400

  Accounts Payable-Leight Co   Cr.$2,400

11. Accounts Payable Dr.$400

 Inventory                 Cr.$400

12. Cash                  Dr.$931

    Discount Allowed Dr.$19

    A/R CreekCo.         Cr.$950

16.  Accounts Payable   Dr.$6,700

     Bank                            Cr.$6,566

    Inventory                      Cr.$  134

19. A/R Art Co       Dr.$1,200

    Sales Revenue  Cr.$1,200

Cost of Goods Sold   Dr.$800

Inventory                    Cr.$800

21. Allowance on Goods Dr.$200

   A/R Art Co.                   Cr.$200

24.  Accounts Payable     Dr.$2,400

      Bank                            Cr.$2,352

      Inventory                     Cr.$48

30.   Bank     Dr.$1,000

       A/R Art Co.(1,200-200)  Cr.$1,000

31. A/R Creek Co.   Dr.$6,900

    Sales Revenue   Cr.$6,900

Cost of Goods Sold    Dr.$5,500

Inventory                    Cr.$5,500