Answer:
Carla Vista Warehouse distributes hardback books to retail stores and extends credit terms of 2/10, n/30 to all of its customers. During the month of June, the following merchandising transactions occurred. June 1 Purchased books on account for $1,755 (including freight) from Catlin Publishers, terms 2/10, n/30. 3 Sold books on account to Garfunkel Bookstore for $1,200. The cost of the merchandise sold was $850. 6 Received $55 credit for books returned to Catlin Publishers. 9 Paid Catlin Publishers in full. 15 Received payment in full from Garfunkel Bookstore. 17 Sold books on account to Bell Tower for $1,550. The cost of the merchandise sold was $850. 20 Purchased books on account for $900 from Priceless Book Publishers, terms 3/15, n/30. 24 Received payment in full from Bell Tower. 26 Paid Priceless Book Publishers in full. 28 Sold books on account to General Bookstore for $2,650. The cost of the merchandise sold was $950. 30 Granted General Bookstore $210 credit for books returned costing $30.
Journalize the transactions for the month of June for Carla Vista Warehouse, using a perpetual inventory system.
Solution:
Carla Vista Warehouse
Journal Entries
June 1:
Debit Inventory Account with $1,755
Credit Accounts Payable (Catlin Publishers) with $1,755
To record purchase on account, terms 2/10, n/30.
June 3:
Debit Accounts Receivable (Garfunkel Bookstore) with $1,200
Credit Sales with $,1200
To record sale of books on account.
Debit Cost of Goods Sold with $850
Credit Inventory Account with $850
To record cost of goods sold.
June 6:
Debit Accounts Payable (Catlin Publishers) with $55
Credit Inventory Account with $55
To record return of goods.
June 9:
Debit Accounts Payable (Catlin Publishers) with $1,700
Credit Cash Account with $1,666
Credit Cash Discount with $34
To record full settlement on account.
June 15:
Debit Cash with $1,200
Credit Accounts Receivable (Garfunkel Bookstore) with $1,200
To record full settlement on account, no discount.
June 17:
Debit Accounts Receivable (Bell Tower) with $1,550
Credit Sales with $1,550
To record sale of books on account.
Debit Cost of Goods Sold with $850
Credit Inventory Account with $850
To record cost of goods sold.
June 20:
Debit Inventory Account with $900
Credit Accounts Payable (Priceless Book Publishers) with $900
To record purchase on account, terms 3/15, n/30.
June 24:
Debit Cash Account with $1,519
Debit Cash Discount with $31
Credit Accounts Receivable (Bell Tower) with $1,550
To record full settlement on account.
June 26:
Debit Accounts Payable (Priceless Book Publishers) with $900
Credit Cash Discount with $27
Credit Cash Account with $873
To record full settlement on account.
June 28:
Debit Accounts Receivable (General Bookstore) with $2,650
Credit Sales with $2,650
To record sale of books on account.
Debit Cost of Goods Sold with $950
Credit Inventory Account with $950
To record cost of goods sold.
June 30:
Debit Sales Account with $210
Credit Accounts Receivable (General Bookstore) with $210
To record books returned.
Debit Inventory with $30
Credit Cost of Goods Sold with $30
To record cost of goods returned.
Explanation:
a) Sales terms of 2/10, n/30 means that all credit sales are granted a cash discount of 2% if payment is received within 10 days and the credit period is for 30 days, beyond which interest will be accrued. The customer must pay within 30 days, within 10 days to take advantage of the 2% discount.
b) On June 15, Garfunkel Bookstore could not benefit from the discount window since it did not pay within 10 days. It therefore lost 2% or $24 for paying three days later.
c) Under the perpetual inventory system, inventory movements are reflected in the accounts immediately. Inventory is tracked continuously. It is unlike the periodic inventory system where physical count had to be undertaken before records are made in the books. The perpetual inventory system is more efficient and technology-friendly than the periodic system.
