Fundamental Accounting Principles -Hardcover
Fundamental Accounting Principles -Hardcover
22nd Edition
ISBN: 9780077862275
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 5, Problem 1BPSB
To determine

Concept Introduction:

Journal Entries:

A journal entry can be defined as recording of a transaction in the books of accounts. Every transaction has two effects, so according to the effects the journal entries are recorded. There is debit and credit in every journal entry. On the basis of the basic accounting rules for assets, liabilities, revenues or incomes, the debit and credit are decided.

To prepare:

Journal entries for Yarvelle Company for merchandising transactions.

Expert Solution & Answer
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Answer to Problem 1BPSB

Solution:

The journal entries for Yarvelle Company for merchandising transactions are −

    DateAccounts DescriptionsDebitCredit
    May-02
    Merchandise Inventory
    10,000


    Accounts Payable - Havel

    10,000

    (To record purchase of merchandise inventory)






    May-04
    Accounts Receivables - Heather
    11,000


    Sales

    11,000

    (To record sales of inventory)






    May-04
    Cost of Goods sold
    5,600


    Merchandise Inventory

    5,600

    (To record cost of goods sold for the sales on May 4)






    May-05
    Merchandise Inventory
    250


    Cash

    250

    (To record payment of freight on merchandise inventory)






    May-09
    Cash
    2,500


    Sales

    2,500

    (To record cash sales of inventory)






    May-10
    Merchandise Inventory
    3,650


    Accounts Payable - Duke

    3,650

    (To record purchase of merchandise inventory)






    May-12
    Accounts Payable - Duke
    400


    Merchandise Inventory

    400

    (To record purchase return to Duke)






    May-14
    Cash
    10,780


    Sales Discounts
    220


    Accounts Receivables - Heather

    11,000

    (To record collection of cash within discount period)






    May-17
    Accounts Payable - Havel
    10,000


    Merchandise Inventory

    100

    Cash

    9,900

    (To record payment of accounts payable within discount period)






    May-20
    Accounts Receivable - Tameron
    2,800


    Sales

    2,800

    (To record sales of inventory)






    May-20
    Cost of goods sold
    1,450


    Merchandise Inventory

    1,450

    (To record cost of goods sold for the sales on May 20)






    May-22
    Merchandise Inventory
    400


    Accounts Receivable - Tameron

    400

    (To record issue of credit memo to Tameron)






    May-25
    Accounts Payable - Duke
    3250


    Merchandise Inventory

    65

    Cash

    3185




    May-30
    Cash
    2,352


    Sales Discounts
    48


    Accounts Receivable - Tameron

    2400

    (To record cash receipt from Tameron within discount period)






    May-31
    Accounts Receivables - Heather Co.
    7,200


    Sales

    7,200

    (To record sales of inventory)







    Cost of Goods sold
    3,600


    Merchandise Inventory

    3,600

    (To record cost of goods sold for the sales on May 31)


Explanation of Solution

The above journal entries can be explained as −

May 2: The merchandise is purchased from Havel Co. So merchandise is debited and Accounts payable − Havel co. is credited.

May 4: The merchandised inventory is sold to Heather Co. so sales are recorded with a credit and since, the goods are sold on account, so Accounts receivable − Heather Co. is debited.

May 4: The cost of goods sold for sales on May 4 has been recorded. Thus, the merchandise inventory is credited as it is getting reduce and costs of goods sold is debited as it is an expense.

May 5: The freight expense of $ 250 is paid on the purchases of May 2, thus added to the merchandise costs. So, merchandise is increased with a debit and cash is credited.

May 9: The goods are sold on cash basis, thus cash is debited and sales revenue is credited.

May 10: The merchandise is purchased from Duke Co. So merchandise is debited and Accounts payable − Duke Co. is credited

May 12: The purchase returns are recorded in this entry. Thus, the Accounts payable − Duke Co. is debited and merchandise inventory is credited.

May 14: The balance due from Heather Co. is received after deducting the sales discounts. The sales discounts are calculated as−

The given information is −

  • Credit sales = $ 11,000
  • Terms of credit sales = 2/10, n/60
  • Discount rate = 2 % (if it is paid within a period of 10 days)

  •   Sales discounts = Credit Sales X Discount rateSales discounts = $ 11,000 X 2 %Sales discounts = $ 220

Thus, the sales discount will be = $ 220
The amount of cash will be calculated as −

  Cash to be received = Credit Sales  Sales DiscountCash to be received = $ 11,000  $ 220Cash to be received = $ 10,780

Thus, the cash to be received = $ 10,780.

May 17:The balance after deducting the discounts is paid to Havel Co. for the merchandise purchased on May 2. The discount received will be recorded under merchandise inventory. The discount will be calculated as −

The given information is −

  • Credit purchases = $ 10,000
  • Terms of credit sales = 1/10, n/30
  • Discount rate = 1 % (if it is paid within a period of 10 days)

  •   Discounts = Credit Purchases X Discount rateDiscounts = $ 10,000 X 1 %Discounts = $ 100

Thus, the sales discount will be = $ 100
The amount of cash will be calculated as −

  Cash to be Paid = Credit Purchases DiscountCash to be Paid = $ 10,000  $ 100Cash to be Paid = $ 9,900

Thus, the cash to be paid = $ 9,900.

May 20: The merchandised inventory is sold to Tameron Co. so sales are recorded with a credit and since, the goods are sold on account, so Accounts receivable − Tameron Co. is debited.

May 20: The cost of goods sold for sales on May 20 has been recorded. Thus, the merchandise inventory is credited as it is getting reduce and costs of goods sold is debited as it is an expense.

May 22: The sales returns are recorded in this entry, thus, merchandise inventory is debited and Accounts receivable − Tameron Co. is credited.
May 25: The balance after deducting the discounts is paid to Duke Co. for the merchandise purchased on May 10. The credit memo received from Duke will also be deducted from the balance.

  Balance of Accounts payable = Credit Purchases  Amount of credit memoBalance of Accounts payable = $ 3,650  $ 400Balance of Accounts payable = $ 3,250

The discount received will be recorded under merchandise inventory. The discount will be calculated as −
The given information is −

  • Credit purchases balance = $ 3,250
  • Terms of credit sales = 2/15, n/360
  • Discount rate = 2 % (if it is paid within a period of 15 days)

  •   Discounts = Credit Purchases X Discount rateDiscounts = $ 3,250 X 2 %Discounts = $ 65

Thus, the discount will be = $ 65
The amount of cash will be calculated as −

  Cash to be Paid = Credit Purchases DiscountCash to be Paid = $ 3,250  $ 65Cash to be Paid = $ 3,185

Thus, the cash to be paid = $ 3,185.

May 30: The balance due from TameronCo. is received after deducting the sales discounts.
The balance will be calculated as −

  Balance of Accounts receivable = Credit Sales  Amount of credit memoBalance of Accounts receivable = $ 2,800  $ 400Balance of Accounts receivable = $ 2,400

The sales discounts are calculated as −
The given information is −

  • Credit sales balance = $ 2,400
  • Terms of credit sales = 2/15, n/60
  • Discount rate = 2 % (if it is paid within a period of 15 days)

  •   Sales discounts = Credit Sales X Discount rateSales discounts = $ 2,400 X 2 %Sales discounts = $ 480

Thus, the sales discount will be = $ 480
The amount of cash will be calculated as −

  Cash to be received = Credit Sales balance Sales DiscountCash to be received = $ 2,400  $ 48Cash to be received = $ 2,352

Thus, the cash to be received = $ 2,352.

May 31:The merchandised inventory is sold to Heather Co. so sales are recorded with a credit and since, the goods are sold on account, so Accounts receivable − Heather Co. is debited.

May 31: The cost of goods sold for sales on May 31 has been recorded. Thus, the merchandise inventory is credited as it is getting reduce and costs of goods sold is debited as it is an expense.

Conclusion

Thus, the journal entries for Yarvelle Company have been prepared.

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Chapter 5 Solutions

Fundamental Accounting Principles -Hardcover

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