Answer:
Sandhill Warehouse
Journal Entries:
June 1:
Debit Inventory Account $2,575
Credit Accounts Payable (Catlin Publishers)
To record purchase on account, terms 2/10, n/30.
June 3:
Debit Accounts Receivable (Garfunkel Bookstore) $1,300
Credit Sales $1,300
To record sales of books on account.
Debit Cost of Goods Sold $900
Credit Inventory Account $900
To record cost of books sold.
June 6:
Debit Accounts Payable (Catlin Publishers) $75
Credit Inventory Account $75
To record credit for books returned.
June 9:
Debit Accounts Payable (Catlin Publishers) $2,500
Credit Cash Discount $50
Credit Cash Account $2,450
To record payment on account.
June 15:
Debit Cash Account $1,300
Credit Accounts Receivable (Garfunkel Bookstore) $1,300
To record cash receipt on account.
June 17:
Debit Accounts Receivable (Bell Tower) $1,150
Credit Sales Account $1,150
To record books sold on account.
Debit Cost of Goods Sold $750
Credit Inventory Account $750
To record cost of books sold.
June 20:
Debit Inventory Account $900
Credit Accounts Payable (Priceless Book Publishers) $900
To record purchase on account, terms 3/15, n/30.
June 24:
Debit Cash Account $1,127
Debit Cash Discount $23
Credit Accounts Receivable (Bell Tower) $ 1,150
To record cash receipt on account.
June 26:
Debit Accounts Payable (Priceless Book Publishers) $900
Credit Cash Discount $27
Credit Cash Account $873
To record payment on account.
June 28:
Debit Accounts Receivable (General Bookstore) $1,900
Credit Sales $1,900
To record sale of books on account.
Debit Cost of Goods Sold $970
Credit Inventory Account $970
To record cost of books sold.
June 30:
Debit Sales (Returns) $130
Credit Accounts Receivable (General Bookstore) $130
To record Sales credit
Debit Inventory Account $90
Credit Cost of Goods Sold $90
To record cost of returned books.
Explanation:
1. Purchase of books on account increases inventory and Accounts Payable.
2. Sale of books on account increases Sales and Accounts Receivable. It also reduces the Inventory Account and increases the Cost of Sales.
3. Return on Purchases reverses the entries made when goods were purchased.
4. Since Garfunkel Bookstore paid after 10 days, it could not enjoy the 2% cash discount on offer.
5. Bell Tower paid within 10 days and enjoyed the 2% cash discount.
6. Priceless Book Publishers was paid within 15 days, so the 3% cash discount applies.
7. Return on Sales reverses the entries during sales. |t reduces Sales by a contra account called Sales Returns and the Accounts Receivable. The inventory account is increased and the Cost of Sales is reduced.
8. Journal entries record the daily transactions of a business as they occur. From the general journal, postings are made to the Ledger.
