Question

On October 1, Benji’s Bicycle Store had an inventory of 20 ten speed bicycles at a cost of $200 each. During the month of October, the following transactions occurred.

Oct. 4	Purchased 40 bicycles at a cost of $200 each from Monrue Bicycle Company, terms 1/10, n/30.
Oct. 6	Sold 25 bicycles to Team Wisconsin for $330 each, terms 2/10, n/30.
Oct. 7	Received credit from Monrue Bicycle Company for the return of 2 defective bicycles.
Oct. 13	Issued a credit memo to Team Wisconsin for the return of a defective bicycle.
Oct. 14	Paid Monroe Bicycle Company in full, less discount.

Instructions:

Prepare the journal entries to record the transactions assuming the company uses a perpetual inventory system.

Answer 1

Journal entry :

Date	accounts & explanation	debit	credit
Oct 4	Merchandise inventory (200*40)	8000
	Account payable		8000
	(To record purchase)
Oct 6	Account receivable (25*330)	8250
	Sales revenue		8250
	(To record sale)
oct 7	Account payable (2*200)	400
	Merchandise inventory		400
	(To record received credit)
Oct 13	Merchandise inventory	330
	Account receivable		330
	(To record issue credit memo)
Oct 14	Account payable	7600
	Cash (7600*99/100)		7524
	Merchandise inventory		76
	(To record paid )