Question

Alpha Company used the periodic inventory system for purchase & sales of merchandise. Discount terms for both purchase & sales are, FOB Destination, 2/10, n30 and the gross method is used. > Alpha Company sold on account merchandise costing $3,000 to Bravo Company on May 2, 2016. Selling price was $4,500. Freight charges related to this transaction of $200 were paid by Alpha Company. > Bravo Company returned, to Alpha Company, merchandise with an original cost to Alpha of $300 on May 3, 2016. Merchandise was sold to Bravo for $450
Use this information to prepare Alpha Company's General Journal entries (without explanation) for May 2 & May 3 entries. If no entry is required then write "No Entry Required."

Answer 1

Answer:

2 May 2016 Debit Accounts receivables $4,500; Credit Sales  Revenue $4,500

2 May 2016 Debit Cost of goods sold expense $3,000; Credit Inventory $3,000

2 May 2016 Debit Cost of goods sold expense $200; Credit Bank $200

3 May 2016 Debit Sales returns $450; Credit Accounts receivables $450

3 May 2016 Debit Inventory $300; Credit Cost of goods sold $300

Explanation:

2 May 2016 Debit Accounts receivables $4,500; Credit Sales  Revenue $4,500

2 May 2016 Debit Cost of goods sold expense $3,000; Credit Inventory $3,000

2 May 2016 Debit Cost of goods sold expense $200; Credit Bank $200

3 May 2016 Debit Sales returns $450; Credit Accounts receivables $450

3 May 2016 Debit Inventory $300; Credit Cost of goods sold $300

- Sales returns is called a contra revenue account. It'll reduce the amount of sales since the goods were returned, but keep the amount separate.

Answer 2

Answer:

02-May-2016

Accounts Receivable $      4,500  

Freight Out $          200  

   Cash                                $          200

   Sales                                $      4,500

(Sold merchandise on account, Freight-out paid)  

03-May-2016

Sales $          450  

   Accounts Receivable  $          450

(Sales return of merchandise $ 450)

Explanation: