Question

Recording sales, returns, and discounts taken LO P2 Prepare journal entries to record each of the following sales transactions of a merchandising company. The company uses a perpetual inventory system and the gross method.
Apr. 1 Sold merchandise for $6,600, with credit terms n/30; invoice dated April 1. The cost of the merchandise is $3,960.
Apr. 4 The customer in the April 1 sale returned $740 of merchandise for full credit. The merchandise, which had cost $444, is returned to inventory.
Apr. 8 Sold merchandise for $2,800, with credit terms of 1/10, n/30; invoice dated April 8. Cost of the merchandise is $1,960.
Apr. 11 Received payment for the amount due from the April 1 sale less the return on April 4.

Answer 1

Answer:

Apr. 1

J1

Trade Receivable $6,600 (debit)

Sales Revenue $6,600 (credit)

J2

Cost of Sales $3,960 (debit)

Merchandise $3,960 (credit)

Apr. 4

J1

Sales Revenue $740 (debit)

Trade Receivable $740 (credit)

J2

Merchandise $444 (debit)

Cost of Sales $444 (credit)

Apr. 8

J1

Trade Receivable $2,800 (debit)

Sales Revenue $2,800 (credit)

J2

Cost of Sales $1,960 (debit)

Merchandise $1,960 (credit)

Apr. 11

Cash $5,860 (debit)

Trade Receivable (credit)

Explanation:

Perpetual method of inventory keeps a record of cost of inventory after every sale.

Thus, for every sale transaction remember to recognize the Sales Revenue and the Cost of Sales that follow the sale.

For any returns, De-recognize the Sales Revenue - to the extend of the credit granted and also de-recognize the Cost of Sales to the extend of the value of Inventory returned.