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Horngren'S Financial And Managerial Accounting
Found in: Page 312

Short Answer

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.

The total of debit and credit is $52,641.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Sales Returns

In accounting, the term sales returns refer to a situation when customers return the goods sold to them, to the business. The major cause of sales returns is defective or damaged goods, and it decreases the sales revenue of the merchandiser.

Step 2: Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Feb 3

Merchandise inventory

5,200

Accounts payable (Silton Wholesalers)

5,200

Feb 4

Merchandise inventory

70

Cash

70

Feb 4

Merchandise inventory

1,500

Cash

1,500

Feb 6

Accounts payable (Silton wholesalers)

900

Merchandise inventory

900

Feb 8

Accounts receivable (Herenda company)

5,600

Sales revenue

5,600

Feb 8

Cost of goods sold

2,532

Merchandise inventory

2,532

Feb 9

Merchandise inventory

7,000

Accounts payable (Teddy Wholesalers)

7,000

Feb 10

Accounts payable (Silton wholesalers) [5,200-900]

4,300

Merchandise inventory (4300*2%)

86

Cash

4,214

Feb 12

Cash

5,432

Sales discount (5600*3%)

168

Accounts receivable (Herenda company)

5,600

Feb 13

Accounts payable (Teddy wholesalers)

500

Merchandise inventory

500

Feb 15

Accounts receivable (Jordon company)

3,400

Sales revenue

3,400

Feb 15

Cost of goods sold

1,496

Merchandise inventory

1,496

Feb 22

Accounts payable (Teddy wholesalers) [7000-500]

6,500

Merchandise inventory (6500*1%)

65

Cash

6,435

Feb 23

Sales returns and allowances

1,000

Accounts receivable (Jordon company)

1,000

Feb 23

Merchandise inventory

440

Cost of goods sold

440

Feb 25

Accounts receivable (Smith)

1,770

Sales revenue

1,700

Cash

70

Feb 25

Cost of goods sold

663

Merchandise inventory

663

Feb 27

Cash

1,736

Sales discount (1700*2%)

34

Accounts receivable (Smith)

1,770

Feb 28

Cash (3400-1000)

2,400

Accounts receivable (Jordan company)

2,400

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