Question

Sales related and purchase related transactions.

The following were selected from among the transactions completed by the Brown Company during

May of the current year: Prepare journal entries for the following transactions.

5 Sold merchandise for cash, $120,000. The cost of merchandise sold was $75,000.

5 Purchased merchandise on account from Black Co., list price $70,000, trade

discount 40%, freight of $400, terms FOB shipping point, 2/10, n/eom.

12 Sold merchandise on account to Red Co., list price $15,000, terms 3/15, n/30.

The cost of merchandise sold $6,000.

13 Red returned $3,000 of merchandise purchased on May12 from Black Co.

14 Paid Black on account, for purchase of May 5.

22 Sold merchandise on account to Yellow Co., $60,000. The cost of merchandise

sold was $35,000.

25 Received merchandise returned by Yellow co. from sale of May 22, $6,000. The

cost of the returned merchandise was $2,500.

28 Received cash on account from sale of May 12 to Red Co, less the return of May 13.

31 Paid VISA service fee of $3,000.

Answer 1

Journal Entries:

Date	Account Titles and Explanation	Debit	Credit
May. 5	Cash	$120,000
	Sales Revenue		$120,000
	(To record cash sales made)
	Cost of Goods Sold	$75,000
	Merchandise Inventory		$75,000
	(To record the cost of goods sold)
May. 5	Merchandise Inventory	$70,000
	Trade Discount ($70,000*40/100)		$28,000
	Accounts Payable ($70,000 - $28,000)		$42,000
	(To record the purchase of merchandise inventory on account)
	Freight Expenses	$400
	Cash		$400
	(To record the payment of freight expenses)
May. 12	Accounts Receivable	$15,000
	Sales Revenue		$15,000
	(To record cash sales made)
	Cost of Goods Sold	$6,000
	Merchandise Inventory		$6,000
	(To record the cost of goods sold)
May. 13	Sales returns and allowances	$3,000
	Accounts receivable		$3,000
	(To record the sales return)
May. 14	Accounts Payable	$42,000
	Discount received ($42,000*2/100)		$840
	Cash ($42,000 - $840)		$41,160
	(To record the payment within the discount period)
May. 22	Accounts Receivable	$60,000
	Sales Revenue		$60,000
	(To record cash sales made)
	Cost of Goods Sold	$35,000
	Merchandise Inventory		$35,000
	(To record the cost of goods sold)
May. 25	Sales returns and allowances	$6,000
	Accounts receivable		$6,000
	(To record the sales returns)
	Merchandise Inventory	$2,500
	Cost of goods sold		$2,500
	(To record the cost of goods returned)
May. 28	Cash ($12,000 - $360)	$11,640
	Discount allowed ($12,000*3/100)	$360
	Accounts receivable ($15,000 - $3,000)		$12,000
	(To record the collection of accounts receivable withint discount period)
May. 31	Visa Expenses	$3,000
	Cash		$3,000
	(To record the payment of VISA expenses)