Question

Latona Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Latona showed Cash of $5,000 and Common Stock of $5,000.
May
1. Purchased merchandise on account from Gray's Wholesale Supply $4,200, terms 2/10, n/30.
2. Sold merchandise on account $2,100, terms 1/10, n/30. The cost of the merchandise sold was $1,300.
5. Received credit from Gray's Wholesale Supply for merchandise returned $350.
9. Received collections in full, less discounts, from customers billed on sales of $2,100 on May 2.
10. Paid Gray's Wholesale Supply in full, less discount. 11 Purchased supplies for cash $350.
12. Purchased merchandise for cash $1,400. 15 Received refund for poor quality merchandise from supplier on cash purchase $150.
17. Purchased merchandise from Amland Distributors $1,300, FOB shipping point, terms 2/10, n/30.
19. Paid freight on May 17 purchase $140.
24. Sold merchandise for cash $3,500. The merchandise sold had a cost of $2,100.
25. Purchased merchandise from Horvath, Inc. $620, FOB destination, terms 2/10, n/30.
27 Paid Amland Distributors in full, less discount.
29 Made refunds to cash customers for defective merchandise $70.

The returned merchandise had a fair value of $30. 31 Sold merchandise on account $1,000 terms n/30. The cost of the merchandise sold was $560. Latona Hardwareâs chart of accounts includes the following:

No. 101 Cash, No. 112 Accounts Receivable, No. 120 Inventory, No. 126 Supplies, No. 201 Accounts Payable, No. 311 Common Stock, No. 401 Sales Revenue, No. 412 Sales Returns and Allowances, No. 414 Sales Discounts, and No. 505 Cost of Goods Sold.

Required:
Journalize the transactions using a perpetual inventory system.

Answer 1

Answer:

May 1

Dr Inventory $4,200

Cr Accounts Payable $4,200

May 2

Dr Accounts Receivable $2,100

Cr Sales Revenue $2,100

Dr Cost of Goods Sold $1,300

Cr Inventory $1,300

May 5

Dr Accounts Payable $350

Cr Inventory $350

May 9

Dr Cash $2,079

Cr Sales Discounts $21

Accounts Receivable $2,100

May 10

Dr Accounts Payable $3,850

Cr Inventory $77

Cr Cash $3,773

May 11

Dr Supplies $350

Cr Cash $350

May 12

Dr Inventory $1,400

Cr Cash $1,400

May 15

Dr Cash $150

Cr Inventory $150

May 17

Dr Inventory $1,300

Cr Accounts Payable $1,300

May 19

Dr Inventory $140

Cr Cash $140

May 24

Dr Cash $3,500

Cr Sales Revenue $3,500

Dr Cost of goods sold $2,100

Cr Inventory $2,100

May 25

Dr Inventory $620

Cr Accounts Payable $620

May 27

Dr Accounts Payable $1,300

Cr Inventory $26

Cr Cash $1,274

May 29

Dr Sales returns and Allowances $70

Cr Cash $70

Dr Inventory $30

Cr Cost of goods sold $30

May 31

Dr Accounts Receivable $1,000

Cr Sales Revenue $1,000

Dr Cost of goods sold $560

Cr Inventory $560

Explanation:

Preparation of the journal entries using a perpetual inventory system

May 1

Dr Inventory $4,200

Cr Accounts Payable $4,200

(To record the purchases on account)

May 2

Dr Accounts Receivable $2,100

Cr Sales Revenue $2,100

(To record the credit sales)

Dr Cost of Goods Sold $1,300

Cr Inventory $1,300

(To record the cost of goods sold)

May 5

Dr Accounts Payable $350

Cr Inventory $350

(To record the purchase returns)

May 9

Dr Cash ($2,100-21) $2,079

Cr Sales Discounts ($2,100*1%) $21

Accounts Receivable $2,100

(To record the cash collected on account)

May 10

Dr Accounts Payable ($4,200-$350) $3,850

Cr Inventory ($3,850*2%) $77

Cr Cash ($3,850-$77) $3,773

(To record the amount paid to suppliers)

May 11

Dr Supplies $350

Cr Cash $350

(To record the supplies purchased)

May 12

Dr Inventory $1,400

Cr Cash $1,400

(To record the cash purchases)

May 15

Dr Cash $150

Cr Inventory $150

(To record the cash refund for poor quality of goods)

May 17

Dr Inventory $1,300

Cr Accounts Payable $1,300

(To record the purchases on account)

May 19

Dr Inventory $140

Cr Cash $140

(To record the freight paid)

May 24

Dr Cash $3,500

Cr Sales Revenue $3,500

(To record the cash sales)

Dr Cost of goods sold $2,100

Cr Inventory $2,100

(To record the cost of goods sold)

May 25

Dr Inventory $620

Cr Accounts Payable $620

(To record the credit purchases)

May 27

Dr Accounts Payable $1,300

Cr Inventory ($1,300*2%) $26

Cr Cash ($1,300-$26) $1,274

(To record the amount paid to supplier)

May 29

Dr Sales returns and Allowances $70

Cr Cash $70

(To record the sales return)

Dr Inventory $30

Cr Cost of goods sold $30

(To record the cost of goods returned)

May 31

Dr Accounts Receivable $1,000

Cr Sales Revenue $1,000

(To record the credit sales)

Dr Cost of goods sold $560

Cr Inventory $560

(To record the cost of goods sold)