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Q 1PSA

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Financial & Managerial Accounting
Found in: Page 213
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Prepare journal entries to record the following merchandising transactions of Cabela’s, which uses the perpetual inventory system and the gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 1 in Accounts Payable—Boden.)

July 1 Purchased merchandise from Boden Company for $6,000 under credit terms of 1∕15, n∕30, FOB shipping point, invoice dated July 1.

2 Sold merchandise to Creek Co. for $900 under credit terms of 2∕10, n∕60, FOB shipping point, invoice dated July 2. The merchandise had cost $500.

3 Paid $125 cash for freight charges on the purchase of July 1.

8 Sold merchandise that had cost $1,300 for $1,700 cash.

9 Purchased merchandise from Leight Co. for $2,200 under credit terms of 2∕15, n∕60, FOB destination, invoice dated July 9.

11 Received a $200 credit memorandum from Leight Co. for the return of part of the merchandise purchased on July 9.

12 Received the balance due from Creek Co. for the invoice dated July 2, net of the discount.

16 Paid the balance due to Boden Company within the discount period.

19 Sold merchandise that cost $800 to Art Co. for $1,200 under credit terms of 2∕15, n∕60, FOB shipping point, invoice dated July 19.

21 Issued a $100 credit memorandum to Art Co. for an allowance on goods sold on July 19.

24 Paid Leight Co. the balance due, net of discount.

30 Received the balance due from Art Co. for the invoice dated July 19, net of discount.

31 Sold merchandise that cost $4,800 to Creek Co. for $7,000 under credit terms of 2∕10, n∕60, FOB shipping point, invoice dated July 31.

Both sides of the journal totals to $36,825.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Definition of Account Payable

Account payable can be defined as the current liability account representing the revenue still not received from the customer to whom credit sales were made.

Step 2: Journal Entries

DateAccounts and ExplanationDebit $Credit $

1 July

Merchandise inventory

$6,000

Account payable

$6,000

2 July

Accounts receivables – Creek Co.

900

Sales revenue

900

Cost of goods sold

500

Merchandise inventory

500

3 July

Inventory

125

Cash

125

8 July

Cash

1,700

Sales revenue

1,700

Cost of goods sold

1,300

Merchandise inventory

1,300

9 July

Merchandise inventory

2,200

Accounts payable

2,200

11 July

Account payable

200

Inventory

200

12 July

Cash

882

Discount allowed

18

Accounts receivables

900

16 July

Accounts payable

6,000

Discount received

60

Cash

5,940

19 July

Accounts receivables

1,200

Sales revenue

1,200

Cost of goods sold

800

Merchandise inventory

800

21 July

Allowance on goods

100

Accounts receivables

100

24 July

Accounts payable

2,000

Discount received

40

Cash

$1,960

30 July

Cash

1,078

Discount allowed

22

Accounts receivable

1,100

31 July

Accounts receivable

7,000

Sales

7,000

Cost of goods sold

4,800

Merchandise inventory

4,800

$36,825

$36,825

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