Question

Prepare separate entries for each transaction for Cullumber Company. The merchandise purchased by Pharoah Company on June 10 cost Cullumber Company $3,770, and the goods returned cost Cullumber Company $230. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Answer 1

Answer:

J1

Cost of Sales $3,770 (debit)

Merchandise $3,770 (credit)

J2

Merchandise $230 (debit)

Cost of Sales $230 (credit)

Explanation:

When Cullumber Company sells goods to Pharoah Company the entries to recognize the cost of sale and decrease in inventory will be :

Cost of Sales $3,770 (debit)

Merchandise $3,770 (credit)

When Pharaoh Company returns goods to Cullumber Company, the entries to de-recognize the cost of sale and recognize the replenishment of inventory will be :

Merchandise $230 (debit)

Cost of Sales $230 (credit)