Question

Journalize the following transactions for Griffin Company. Assume a perpetual inventory system. Also, assume a constant gross profit ratio for all items sold.
Make sure to enter the day for each separate transaction.

1) October 1: Sold goods costing $3,600 to Barnes Company for cash, $6,000.

2) October 7: Barnes Company returned undamaged merchandise, purchased on October 1, for a cash refund, $670.

Answer 1

Answer:

1) October 1:

1.1

Debit Cost of Goods sold $3,600

Credit Merchandise $3,600

1.2

Debit Cash $6,000

Credit Revenue $6,000

2) October 7

2.1.

Debit Revenue $670

Credit Cash $670

2.2.

Debit Merchandise $402

Credit Cost of Goods sold $402

Explanation:

1. October 1: when sold goods, the company recorded Cost of Goods sold and revenue:

1.1

Debit Cost of Goods sold $3,600

Credit Merchandise $3,600

1.2

Debit Cash $6,000

Credit Revenue $6,000

2. October 7

The percentage of revenue that merchandise returned = $670/$6,000 = 11.17%

Assume a constant gross profit ratio for all items sold.

Cost of returned merchandise = $3,600 x 11.17% = $402

2.1.

Debit Revenue $670

Credit Cash $670

2.2.

Debit Merchandise $402

Credit Cost of Goods sold $402