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Horngren'S Financial And Managerial Accounting
Found in: Page 325

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Short Answer

Journalize the following transactions for Santa Fe Art Gift Shop. Assume Santa Fe uses the gross method to record sales revenue. Explanations are not required.

Feb. 3 Purchased $2,800 of merchandise inventory on account under terms 3/10, n/EOM and FOB shipping point.

7 Returned $700 of defective merchandise purchased on February 3.

9 Paid freight bill of $400 on February 3 purchase.

10 Sold merchandise inventory on account for $4,800. Payment terms were 1/15, n/30. These goods cost the company $2,400.

12 Paid amount owed on credit purchase of February 3, less the return and the discount.

28 Received cash from February 10 customer in full settlement of their debt.

The total of debits and credits is $18,000.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Sales Revenue

In accounting, sales revenue refers to the amount of money generated by a business concerned by selling goods or services to the customers. Sales revenue is considered to be an operating income and is the primary source of generating revenues.

Step 2: Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Feb 3

Merchandise inventory

2,800

Accounts payable

2,800

Feb 7

Accounts payable

700

Merchandise inventory

700

Feb 9

Freight-in

400

Cash

400

Feb 10

Accounts receivable

4,800

Sales revenue

4,800

Feb 10

Cost of goods sold

2,400

Merchandise inventory

2,400

Feb 12

Accounts payable (2800-700)

2,100

Cash

2,037

Merchandise inventory (2100*3%)

63

Feb 28

Cash

4,800

Accounts receivable

4,800

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