Question

Suppose Piranha.com sells 3,500 books on account for $17 each (cost of these books is $35,700) on October 10, 2018 to The Textbook Store. One hundred of these books (cost $1,020) were damaged in shipment, so Piranha.com later received the damaged goods from The Textbook Stores as sales returns on October 13, 2018.
Requirements

1. Journalize The Textbook Store's October 2018 transactions. The company estimates sales returns at the end of each month.

2. Journalize Piranha.com's October 2018 transactions. The company estimates sales returns at the end of each month.

Answer 1

Answer:

The journal entries are as follows:

(1) (i) On October 10, 2018

Merchandise inventory A/c (3,500 × $17) Dr. $59,500

        To Accounts payable (Piranha)                             $59,500

(To record the purchase of books)

(ii) On October 13, 2018

Accounts payable A/c (100 × $17) Dr. $1,700

        To merchandise inventory                     $1,700

(To record the purchase return of book)

(2) (i) On October 10, 2018

Accounts receivable A/c Dr. $59,500

         To sales

(To record the sales of book)

Cost of goods sold A/c Dr. $35,700

            To merchandise inventory    $35,700

(To record the cost of goods sold of book)

(ii) On October 13, 2018

Sales return and allowances A/c Dr. $1,700

              To accounts receivable                  $1,700

(To record the sales return of book)

Merchandise inventory A/c Dr. $1,020

           To cost of goods sold               $1,020

(To record the cost of good return)