Question

Exercise 5-04

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The following transactions are for Larkspur Company.

1.		On December 3, Larkspur Company sold $512,700 of merchandise to Crane Co., on account, terms 1/10, n/30. The cost of the merchandise sold was $321,500.
2.		On December 8, Crane Co. was granted an allowance of $26,000 for merchandise purchased on December 3.
3.		On December 13, Larkspur Company received the balance due from Crane Co.

(a)

Prepare the journal entries to record these transactions on the books of Larkspur. Larkspur uses a perpetual inventory system. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.	Date	Account Titles and Explanation	Debit	Credit
1.	Choose a transaction date for number 1 Dec. 3Dec. 8Dec. 13Jan. 2	Enter an account title for journal entry 1 to record credit sale	enter a debit amount	enter a credit amount
		Enter an account title for journal entry 1 to record credit sale	enter a debit amount	enter a credit amount
		(To record sale of merchandise on account)
	Choose a transaction date for number 1 Dec. 3Dec. 8Dec. 13Jan. 2	Enter an account title for journal entry 2 to record cost of merchandise sold	enter a debit amount	enter a credit amount
		Enter an account title for journal entry 2 to record cost of merchandise sold	enter a debit amount	enter a credit amount
		(To record cost of merchandise sold on account)
2.	Choose a transaction date for number 2 Dec. 3Dec. 8Dec. 13Jan. 2	Enter an account title for the third journal entry	enter a debit amount	enter a credit amount
		Enter an account title for the third journal entry	enter a debit amount	enter a credit amount
3.	Choose a transaction date for number 2 Dec. 3Dec. 8Dec. 13Jan. 2	Enter an account title for the journal entry on December 13	enter a debit amount	enter a credit amount
		Enter an account title for the journal entry on December 13	enter a debit amount	enter a credit amount
		Enter an account title for the journal entry on December 13	enter a debit amount	enter a credit amount

(b)

Assume that Larkspur Company received the balance due from Crane Co. on January 2 of the following year instead of December 13. Prepare the journal entry to record the receipt of payment on January 2. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Jan. 2	enter an account title	enter a debit amount	enter a credit amount
	enter an account title	enter a debit amount	enter a credit amount

Answer 1

Answer (a).

No.	Date	Account Titles and Explanation	Debit	Credit
1.	Dec. 3	Accounts Receivable	512,700
		Sales Revenue		512,700
		(To record sale of merchandise on account)
	Dec. 3	Cost of Goods Sold	321,500
		Inventory		321,500
		(To record cost of merchandise sold on account)
2	Dec. 8	Sales Returns and Allowances	26,000
		Accounts Receivable		26,000
		(To record the allowance granted on merchandise sold )
3	Dec. 13	Cash	481,833
		Sales Discounts (486,700 * 1 %)	4,867
		Accounts Receivable [512,700 - 26,000]		486,700
		(To record the received the balance due from Crane Co.)

Answer (b).

Date	Account Titles and Explanation	Debit	Credit
Jan. 2	Cash	486,700
	Accounts Receivable [512,700 - 26,000]		486,700
	(To record the received the balance due from Crane Co.)