Question

Following are the merchandising transactions for Dollar Store:Nov. 1 Dollar Store purchases merchandise for $1,500 on terms of 2/5, n/30, FOB shipping point, invoice dated November 1.5 Dollar Store pays cash for the November 1 purchase.7 Dollar Store discovers and returns $200 of defective merchandise purchased on November 1, and paid for on November 5, for a cash refund.10 Dollar Store pays $90 cash for transportation costs for the November 1 purchase.13 Dollar Store sells merchandise for $1,600 with terms n/30. The cost of the merchandise is $800.16 Merchandise is returned to the Dollar Store from the November 13 transaction. The returned items are priced at $160 and cost $80: the items were not damaged and were returned to inventory.Journalize the above merchandising transactions for the Dollar Store assuming it uses a perpetual inventory system and the gross method.

Answer 1

Answer:

Dollar store Journal entries

Nov 01

Dr Merchandise Inventory 1500

Cr Accounts Payable 1500

Nov 05

Dr Accounts Payable 1500

Cr Merchandise Inventory 30

(1,500*2%)

Cr Cash 1,470

(1500-30)

Nov 07

Dr Cash 196

200*(1-2%)

Cr Merchandise Inventory 196

Nov 10

Dr Merchandise Inventory 90

Cr Cash 90

Nov 13

Dr Accounts Receivable 1,600

Cr Sales 1600

Nov 13

Dr Cost of goods sold 800

Cr Merchandise Inventory 800

Nov 16

Dr Sales returns and allowances 160

Cr Accounts Receivable 160

Nov 16

Dr Merchandise Inventory 80

Cr Cost of goods sold 80

Explanation:

In a merchandising sales transaction the seller tend to sells his or her product and then transfers the legal ownership of the goods to the buyer or the purchaser of the product.

Merchandise inventory can be seen as the the cost of goods which are on hand and are available for sale at any period of time.