Question

The transactions listed below are typical of those involving Southern Sporting Goods (SSG) and Sports R Us (SRU). SSG is a wholesale merchandiser and SRU is a retail merchandiser. Assume all sales of merchandise from SSG to SRU are made with terms n/30, and the two companies use perpetual inventory systems. Assume the following transactions between the two companies occurred in the order listed during the year ended December 31.

a. SSG sold merchandise to SRU at a selling price of $185,000. The merchandise had cost SSG $118,000.

b. Two days later, SRU complained to SSG that some of the merchandise differed from what SRU had ordered. SSG agreed to give an allowance of $9,500 to SRU. SRU also returned some sporting goods, which had cost SSG $18,000 and had been sold to SRU for $22,500.

c. Just three days later SRU paid SSG, which settled all amounts owed.

Prepare the journal entries SSG would record. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

1. Record the sales on account of $185,000 to SRU.

2. Record the cost of goods sold of $118,000.

3. Record the return of unsatisfactory merchandise by SRU for which credit was given to the customer.

4. Record the cost of goods sold to inventory.

5. Record the receipt of payment in full from SRU.

Answer 1

	General Journal	Debit	Credit
1	Accounts Receivable	185000
	Sales revenue		185000
2	Cost of goods sold	118000
	Inventory		118000
3	Sales returns and allowances	32000		=9500+22500
	Accounts Receivable		32000
4	Inventory	18000
	Cost of goods sold		18000
5	Cash	153000		=185000-32000
	Accounts Receivable		153000