FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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The options for the blue shaded discerption tabs are:
Accounts payable, accounts receivable , cash, cost of goods sold, inventory, sales revenue, sales returns and allowances, sales discounts.
Transcribed Image Text:### Selected Transactions for Candy, Inc. During the Month of June
#### Transactions:
- **June 18**: Sold and shipped on account to Dante Company, $5,000 ($3,000 cost) of merchandise, with terms of 2/10, n/30.
- **June 25**: Dante Company returned merchandise billed at $700 on June 18 ($300 cost).
- **June 27**: Received from Dante Company a check for full settlement of the June 18 transaction.
#### Requirement:
Prepare the necessary journal entries for (a) Candy, Inc., and (b) Dante Company. Both companies use the perpetual inventory system.
#### Seller’s Journal Entries:
1. **CANDY, INC. GENERAL JOURNAL:**
| **Date** | **Description** | **Debit ($)** | **Credit ($)** |
|----------|--------------------------------------------------------|---------------|----------------|
| June 18 | Sold merchandise to Dante Company terms 2/10, n/30. | | |
| | | | |
| | Cost of merchandise sold to Dante Company | | |
| June 25 | Merchandise returned by Dante Company | | |
| | | | |
| | Cost of merchandise returned by Dante Company | | |
| June 27 | Sales Discounts | | |
| | Received amount due from Dante Company | | |
This table outlines the internal record-keeping entries that Candy, Inc. should make to reflect the sales and returns transactions that occurred in June, as well as the payment received from Dante Company. Each transaction listed demonstrates the importance of accounting for both the values received and the costs associated with any returns, adhering to the perpetual inventory system.
#### Explanation:
- **June 18**: Record the sale of merchandise on account, and the cost of sale.
- **June 25**: Record the merchandise return and its cost.
- **June 27**: Record the sales discount and the receipt of the amount due post-discount from Dante Company.
This exercise demonstrates how businesses must manage their accounts and inventory using a perpetual inventory system, ensuring that they accurately reflect every transaction's financial impact.
Transcribed Image Text:**Selected Transactions for Candy, Inc. during June:**
- **June 18:** Sold and shipped merchandise on account to Dante Company, $5,000 ($3,000 cost of merchandise), with terms of 2/10, n/30.
- **June 25:** Dante Company returned merchandise billed at $700 on June 18 ($300 cost).
- **June 27:** Received from Dante Company a check for the full settlement of the June 18 transaction.
**Required:**
Prepare the necessary journal entries for (a) Candy, Inc., and (b) Dante Company. Both companies use the perpetual inventory system.
**Seller's Journal Entries**
- Not displayed in the image, but would typically include sales, accounts receivable, returns and allowances, and cash collections.
**Buyer's Journal Entries (Dante Company):**
| **Date** | **Description** | **Debit** | **Credit** |
|----------|------------------------------------------------|-----------|-------------|
| June 18 | Purchased merchandise from Candy, Inc.; terms 2/10, n/30. | . | . |
| June 25 | Returned merchandise to Candy, Inc. | . | . |
| June 27 | Cash | . | . |
| | Paid amount due to Candy, Inc. | | |
**Explanation:**
1. **June 18: Purchased merchandise from Candy, Inc.; terms 2/10, n/30.**
- Not detailed in the provided section, but usually involves a debit to Merchandise Inventory and a credit to Accounts Payable.
2. **June 25: Returned merchandise to Candy, Inc.**
- Involves a debit to Accounts Payable and a credit to Merchandise Inventory for the return.
3. **June 27: Payment for the remaining balance to Candy, Inc.**
- Typically involves a debit to Accounts Payable, a credit to Cash, and if applicable, recognition of any purchase discounts taken (debit) based on the payment term of 2/10.
This setup illustrates how Dante Company records purchase, return, and payment transactions. The perpetual inventory system ensures real-time updates to inventory and cost accounts.
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