Question

Alpha Company used the periodic inventory system for purchase & sales of merchandise. Discount terms for both purchase & sales are, FOB Destination, 2/10, n30 and the gross method is used.

> Alpha Company sold on account merchandise costing $3,000 to Bravo Company on May 2, 2016. Selling price was $4,500. Freight charges related to this transaction of $200 were paid by Alpha Company.

> Bravo Company returned, to Alpha Company, merchandise with an original cost to Alpha of $300 on May 3, 2016. Merchandise was sold to Bravo for $450

Use this information to prepare Alpha Company's General Journal entries (without explanation) for May 2 & May 3 entries. If no entry is required then write "No Entry Required."

Answer 1

Ans:

1.

Alpha Uses Gross method of entry, so transaction are to be recorded at sale value without discount.

Journal entry will be:

Date	Account Title	Debit	Credit
May 2, 2016	Account Receivable	$4,500
	Cost of Goods sold	$3,000
	Freight Expense	$200
	Sales		$4,500
	Inventory		$3,000
	Cash		$200

2.

Journal Entry for return of Goods:

Date	Account Title	Debit	Credit
May 3, 2016	Sales Return	$450
	Inventory	$300
	Account Receivable		$450
	Cost of goods sold		$300

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