Prepare journal entries to record the following merchandising transactions of Stone Company, which applies the perpetual inventory system. (Hint: It will help to identify each receivable and payable; for example, record the purchase on August 1 in Accounts Payable — Abilene.)

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Prepare journal entries to record the following merchandising transactions of Stone Company, which applies
the perpetual inventory system. (Hint: It will help to identify each receivable and payable; for example,
record the purchase on August 1 in Accounts Payable — Abilene.)
Aug. 1 Purchased merchandise from Abilene Company for $6,000 under credit terms of 1y10, ny30,
FOB destination, invoice dated August 1.
4 At Abilene’s request, Stone paid $100 cash for freight charges on the August 1 purchase, reducing
the amount owed to Abilene.
5 Sold merchandise to Lux Corp. for $4,200 under credit terms of 2y10, ny60, FOB destination,
invoice dated August 5. The merchandise had cost $3,000.
8 Purchased merchandise from Welch Corporation for $5,300 under credit terms of 1y10, ny45,
FOB shipping point, invoice dated August 8. The invoice showed that at Stone’s request, Welch
paid the $240 shipping charges and added that amount to the bill. (Hint: Discounts are not applied
to freight and shipping charges.)
9 Paid $120 cash for shipping charges related to the August 5 sale to Lux Corp.
10 Lux returned merchandise from the August 5 sale that had cost Stone $500 and been sold for
$700. The merchandise was restored to inventory.
12 After negotiations with Welch Corporation concerning problems with the merchandise purchased
on August 8, Stone received a credit memorandum from Welch granting a price
reduction of $800.
15 Received balance due from Lux Corp. for the August 5 sale less the return on August 10.
18 Paid the amount due Welch Corporation for the August 8 purchase less the price reduction
granted.
19 Sold merchandise to Trax Co. for $3,600 under credit terms of 1y10, ny30, FOB shipping
point, invoice dated August 19. The merchandise had cost $2,500.
22 Trax requested a price reduction on the August 19 sale because the merchandise did not meet
specifications. Stone sent Trax a $600 credit memorandum to resolve the issue.
29 Received Trax’s cash payment for the amount due from the August 19 sale.
30 Paid Abilene Company the amount due from the August 1 purchase

EXPERT ANSWER

Aug 1
Debit Inventory $6,000
Credit Accounts Payable – Abilene $6,000

Aug 4
Debit Inventory $100
Credit Cash $100

Aug 5
Debit Accounts Receivable – Lux $4,200
Debit Cost of Goods Sold $3,000
Credit Sales $4,200
Credit Inventory $3,000

Aug 8
Debit Inventory $5,540 [$5,300 + $240]
Credit Accounts Payable – Welch $5,540

Aug 9
Debit Delivery Expense $120
Credit Cash $120

Aug 10
Debit Sales Returns and Allowances $700
Debit Inventory $500
Credit Accounts Receivable – Lux $700
Credit Cost of Goods Sold $500

Aug 12
Debit Accounts Payable – Welch $800
Credit Inventory $800

Aug 15
Debit Cash $3,430
Debit Sales Discounts $70 [$3,500 x 2%]
Credit Accounts Receivable – Lux $3,500 [$4,200 – $700]

Aug 18
Debit Accounts Payable – Welch $4,740 [$5,300 + 240 – $800]
Credit Inventory $45 [($5,300 – $800) x 1%]
Credit Cash $4,695

Aug 19
Debit Accounts Receivable – Trax $3,600
Debit Cost of Goods Sold $2,500
Credit Sales $3,600
Credit Inventory $2,500

Aug 22
Debit Sales Returns and Allowances $600
Credit Accounts Receivable – Trax $600

Aug 29
Debit Cash $2,970
Debit Sales Discounts $30 [($3,600 – $600) x 1%]
Credit Accounts Receivable – Trax $3,000 [$3,600 – $600]

Aug 30
Debit Accounts Payable – Abilene $6,000
Credit Cash $6,000