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Horngren'S Financial And Managerial Accounting
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Short Answer

Suppose Muddyriver.com sells 2,000 books on account for $19 each (cost of these books is $22,800), credit terms 1/20, n/45 on October 10, to The Salem Store. The Salem Store paid the balance to Muddyriver.com on October 22.

Requirements

1. Journalize the Salem Store’s October transactions.

2. Journalize Muddyriver.com’s October transactions. Assume Muddyriver.com uses the gross method to record sales revenue.

The total of debits and credits for Salem Store is $76,000.

The total of debits and credits for Muddyriver is $98,800.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Journal Entries

In accounting, journal entries are one of the processes of recording and maintaining the financial transactions of a business entity. It records the business transactions chronologically and helps the business to prepare ledgers and trial balances.

Step 2: Preparation of journal entries for Salem Store

Date

Accounts and Explanation

Debit ($)

Credit ($)

Oct 10

Merchandise inventory

38,000

Accounts payable

38,000

(To record the purchase)

Oct 22

Accounts payable

38,000

Cash

37,620

Merchandise inventory

380

(To record the payment)

Step 3: Preparation of journal entries for Muddyriver.com

Date

Accounts and Explanation

Debit ($)

Credit ($)

Oct 10

Accounts receivable

38,000

Sales revenue

38,000

(To record the sales)

Oct 10

Cost of goods sold

22,800

Merchandise inventory

22,800

(To record the cost of goods sold)

Oct 22

Cash

37,620

Sales discount (38000*1%)

380

Accounts receivable

38,000

(To record the receipt of payment)

Most popular questions for Business-studies Textbooks

Journalize the following transactions that occurred in February 2018 for Oceanic. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Oceanic estimates sales returns at the end of each month.

Feb. 3 Purchased merchandise inventory on account from Silton Wholesalers, $5,200. Terms 2/15, n/EOM, FOB shipping point.

4 Paid freight bill of $70 on February 3 purchase.

4 Purchased merchandise inventory for cash of $1,500.

6 Returned $900 of inventory from February 3 purchase.

8 Sold merchandise inventory to Herenda Company, $5,600, on account. Terms 3/15, n/35. Cost of goods, $2,352.

9 Purchased merchandise inventory on account from Teddy Wholesalers, $7,000. Terms 1/10, n/30, FOB destination.

10 Made payment to Silton Wholesalers for goods purchased on February 3, less return and discount.

12 Received payment from Herenda Company, less discount.

13 After negotiations, received a $500 allowance from Teddy Wholesalers.

15 Sold merchandise inventory to Jordon Company, $3,400, on account. Terms n/EOM. Cost of goods, $1,496.

22 Made payment, less allowance, to Teddy Wholesalers for goods purchased on February 9.

23 Jordon Company returned $1,000 of the merchandise sold on February 15. Cost of goods, $440.

25 Sold merchandise inventory to Smith for $1,700 on account that cost $663. Terms of 2/10, n/30 were offered, FOB shipping point. As a courtesy to Smith, $70 of freight was added to the invoice for which cash was paid by Oceanic.

27 Received payment from Smith, less discount.

28 Received payment from Jordon Company, less return.

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