Question

Marks Building Supplies (MBS) is a local hardware store. MBS uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis:

A. Sold merchandise for cash (cost of merchandise $300,300) $600,000

B. Received merchandise returned by customers as unsatisfactory (but in perfect condition) for cash refund (original cost of merchandise $6,000) $8,700

C. Sold merchandise (costing $8,000) to a customer account with terms n/30. $6,000

D. Collected half the balance owed by the customer in (c) $3,000

E. Granted a partial allowance relating to credit sales the customer in (c) had not yet paid. $2,000

Prepare the journal entries for the above transactions.

Answer 1

Number		Debit	Credit
A(1)	Cash	600000
	Sale		600000
	( cash sales)
A(2)	Cost of goods sold	300300
	Inventory		300300
	( entry for cost of goods sold)
B(1)	Sales return and allowances	8700
	Cash		8700
	( sales return )
B(2)	inventory	6000
	Cost of goods sold		6000
	( adjustment for cost of sales return)
C(1)	Account receivable	6000
	Sale		6000
	( credit sales)
C(2)	Cost of goods sold	8000
	Inventory		8000
	( entry for cost of goods sold)
D	Cash	3000
	Account receivable		3000
	( cash received from c transaction)
E	Bad debt expenses	2000
	Cash	1000
	Account receivable		3000
	( adjustment of transaction c for bad debts)