Question

At the beginning of July, CD City has a balance in inventory of $2,850. The following transactions occur during the month of July.July 3 Purchase CDs on account from Wholesale Music for $1,750, terms 2/10, n/30.July 4 Pay freight charges related to the July 3 purchase from Wholesale Music, $120.July 9 Return incorrectly ordered CDs to Wholesale Music and receive credit, $400.July 11 Pay Wholesale Music in full.July 12 Sell CDs to customers on account, $4,700, that had a cost of $2,450.July 15 Receive full payment from customers related to the sale on July 12.July 18 Purchase CDs on account from Music Supply for $2,550, terms 2/10, n/30.July 22 Sell CDs to customers for cash, $3,650, that had a cost of $1,950.July 28 Return CDs to Music Supply and receive credit of $190.July 30 Pay Music Supply in full.

Answer 1

Answer:

Inventory  1750 debit

Accounts Payable  1,750 credit

--to record purchase--  

Inventory  120 debit

Cash  120 credit

--to record payment of freights--  

Accounts Payable 400 debit

Inventory  400 credit

--to record returned goods--  

Accounts Payable 1350 debit

Inventory             27 credit

Cash          1323 credit

--to record payment within discount--  

 

Accounts Receivables 4700  debit

Sales Revenues  4700 credit

--to record sale--  

COGS  2450  debit

Inventory  2450 credit

--to record COGS of the previous sale--  

Cash  4700  debit

Accounts Receivables  4700 credit

--to record collection in full amount--  

Inventory  2550 debit

Accounts Payable  2550 credit

--to record purchase--  

Accounts Receivables 3650 debit

Sales Revenues  3650 credit

--to record sale--  

COGS  1950 debit

Inventory  1950 credit

--to record COGS of the previous sale--

Accounts Payable 190 debit

Inventory  190 credit

--to record returned goods--  

Accounts Payable 2360 debit

Inventory    47.2 credit

Cash        2312.8 credit

--to record payment within discount--  

Explanation:

We reocrd each entry assuming the basic accounting principles

debit = credit

first purchase balance:

1,750 less 400 return = 1,350

discount 1,350 x 2% = 27

cash outlay 1,350 - 27 = 1,323

second purchase balance:

2,550 less 190= 2,360 balance

discount 2,360 x 2% discount = 47.20

cash outlay 2,360 - 47.20 =  2312.8