Question

1. Scott Ltd buys towels for $50 each and sells them for $80 each. Scott Ltd completed the below transactions below during January 2020:

Jan 1	Purchased 30 towels. Terms 2/10, n/30 from Bark Ltd. EXW supplier’s warehouse.
Jan 2	Paid freight of $100 on Jan 1 purchase.
Jan 3	Sold 5 towels to Yellow Ltd on account. Terms 4/10, n/30
Jan 7	Returned 10 towels purchased 1 Jan and paid the remaining amount due.
Jan 8	Received payment from Yellow Ltd for the amount due on Jan 3 sale.

Required:

Ignore GST. Show supporting calculations.

Prepare the general journal entries to record the above transactions assuming a FIFO perpetual inventory system is used.

Answer 1

Date	Accounts	debit	Credit
Jan 1	Inventory (30*50)	1500
	Accounts payable		1500
Jan 2	inventory	100
	Cash		100
Jan3	accounts receivable(5*80)	400
	Sales revenue		400
	Cost of goods sold(5*50)	250
	Inventory		250
Jan7	Accounts payable(10*50)	500
	Inventory		500
Jan7	Accounts payable (1500-500)	1000
	Inventory (1000*2%)		20
	Cash		980
Jan 8	cash	384
	Sales discount(400*4%)	16
	Accounts receivable		400