Financial Accounting, 8th Edition
Financial Accounting, 8th Edition
8th Edition
ISBN: 9780078025556
Author: Robert Libby, Patricia Libby, Daniel Short
Publisher: McGraw-Hill Education
Question
Book Icon
Chapter 7, Problem 22E

1.

To determine

Record the journal entry for the credit sale under perpetual inventory system.

1.

Expert Solution
Check Mark

Answer to Problem 22E

The journal entry for the credit sale is recorded as follows:

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

February 1, 2014Accounts Receivable 1,500
Sales 1,500
(To record the sales made on account)
February 1, 2014Cost of Goods Sold 975
Merchandised Inventory 975
(To record the cost of goods sold)

Table (1)

Explanation of Solution

  • Accounts receivable is an asset and increased by $1,500. Therefore, debit accounts receivable account with $1,500.
  • Sales are revenue and increased by $1,500. Therefore, credit sales account with $1,500.
  • Cost of goods sold is an expense and increased which has decreased the equity by $975. Therefore, debit cost of goods sold account with $975.
  • Merchandised inventory is an asset and decreased by $975. Therefore, credit the merchandised inventory account with $975.

2.

To determine

Record the journal entry for the account receivable that was collected in full on February 9, 2014.

2.

Expert Solution
Check Mark

Answer to Problem 22E

The journal entry for the account receivable that was collected on February 9, 2014 is recorded as follows:

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

February 9, 2014Cash (2)1,470
Sales discounts (1)30
Accounts Receivable 1,500
(To record the sale discounts)

Table (2)

Explanation of Solution

  • Cash is an asset and increased by $1,470. Therefore, debit cash account with $1,470.
  • Sale discount is a contra-sale account (with normal debit balance) and increased by $30. Therefore, credit the sale discount account with $30.
  • Accounts receivable is an asset and decreased by $1,500. Therefore, credit accounts receivable account with $1,500.

Working note:

Compute the amount of sale discount:

Discount Amount = [Sales Invoice×Rate of Discount]=$1,500×2%=$30 (1)

Determine the amount of cash:

Cash = [SaleSales Discount]=$1,500$30=$1,470 (2)

3.

To determine

Record the journal entry for the account receivable that was collected in full on March 2, 2014.

3.

Expert Solution
Check Mark

Answer to Problem 22E

The journal entry for the account receivable that was collected in full on March 2, 2014 is recorded as follows:

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

March 2, 2014Cash 1,500
Accounts Receivable 1,500
(To record the sales discounts)

Table (3)

Explanation of Solution

  • Cash is an asset and increased by $1,500. Therefore, debit cash account with $1,500.
  • Accounts receivable is an asset and decreased by $1,500. Therefore, credit accounts receivable account with $1,500.

4.

To determine

Record the journal entry for the purchase made on credit.

4.

Expert Solution
Check Mark

Answer to Problem 22E

The journal entry for the purchase made on credit is recorded as follows:

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

March 4, 2014Merchandised Inventory 9,000
Accounts Payable9,000
(To record the purchase of inventories on account)

Table (4)

Explanation of Solution

  • Merchandised inventory is an asset and increased by $9,000. Therefore, debit the merchandised inventory account with $9,000.
  • Accounts payable is a liability and increased by $9,000. Therefore, credit the accounts payable account with $9,000.

5.

To determine

Record the journal entry for the account payable that was paid in full on March 12, 2014.

5.

Expert Solution
Check Mark

Answer to Problem 22E

Record the journal entry for the account payable that was paid in full on March 12.

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

March 12, 2014Accounts Payable 9,000
Inventory (3)270
Cash (4)8,730
(To record the payment made to the supplier)

Table (5)

Explanation of Solution

  • Accounts Payable is liability and decreased by $9,000. Therefore, debit the accounts payable account with $9,000.
  • Merchandised inventory is an asset and decreased by $270. Therefore, credit the merchandised inventory account with $270.
  • Cash is an asset and decreased by $8,730. Therefore, credit cash account with $8,730.

Working notes:

Compute the amount of purchase discount:

Discount Amount = [Purchase Invoice×Rate of Discount]=$9,000×3%=$270 (3)

Determine the amount of cash:

Cash=Invoice PricePurchase discount=$9,000$270=$8,730 (4)

6.

To determine

Record the journal entry for the account payable that was paid in full on March 28.

6.

Expert Solution
Check Mark

Answer to Problem 22E

Record the journal entry for the account payable that was paid in full on March 28.

DateAccount Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

March 12Accounts Payable 9,000
Cash9,000
(To record the payment made to the supplier)

Table (6)

Explanation of Solution

  • Accounts Payable is liability and decreased by $9,000. Therefore, debit the accounts payable account with $9,000.
  • Cash is an asset and decreased by $9,000. Therefore, credit cash account with $9,000.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 7 Solutions

Financial Accounting, 8th Edition

Ch. 7 - Explain briefly the application of the LCM concept...Ch. 7 - Prob. 12QCh. 7 - Consider the following information: ending...Ch. 7 - The inventory costing method selected by a company...Ch. 7 - Which of the following is not a component of the...Ch. 7 - Consider the following information: beginning...Ch. 7 - Consider the following information: beginning...Ch. 7 - An increasing inventory turnover ratio a....Ch. 7 - If the ending balance in accounts payable...Ch. 7 - Prob. 8MCQCh. 7 - Which inventory method provides a better matching...Ch. 7 - Which of the following is false regarding a...Ch. 7 - Prob. 1MECh. 7 - Recording the Cost of Purchases for a Merchandiser...Ch. 7 - Identifying the Cost of Inventories for a...Ch. 7 - Inferring Purchases Using the Cost of Goods Sold...Ch. 7 - Prob. 5MECh. 7 - Matching Inventory Costing Method Choices to...Ch. 7 - Reporting Inventory under Lower of Cost or Market...Ch. 7 - Determining the Effects of Inventory Management...Ch. 7 - Prob. 9MECh. 7 - Prob. 1ECh. 7 - Inferring Missing Amounts Based on Income...Ch. 7 - Prob. 3ECh. 7 - Inferring Merchandise Purchases Abercrombie and...Ch. 7 - Prob. 5ECh. 7 - Prob. 6ECh. 7 - Prob. 7ECh. 7 - Prob. 8ECh. 7 - Prob. 9ECh. 7 - Evaluating the Choice among Three Alternative...Ch. 7 - Prob. 11ECh. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Prob. 14ECh. 7 - Prob. 15ECh. 7 - Prob. 16ECh. 7 - Prob. 17ECh. 7 - Prob. 18ECh. 7 - Prob. 19ECh. 7 - (Chapter Supplement A) Analyzing the Effects of a...Ch. 7 - (Chapter Supplement B) FIFO and LIFO Cost of Goods...Ch. 7 - Prob. 22ECh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Prob. 4PCh. 7 - Evaluating the LIFO and FIFO Choice When Costs Are...Ch. 7 - Prob. 6PCh. 7 - Evaluating the Effects of Manufacturing Changes on...Ch. 7 - Evaluating the Choice between LIFO and FIFO Based...Ch. 7 - Prob. 9PCh. 7 - (Chapter Supplement A) Analyzing LIFO and FIFO...Ch. 7 - Prob. 1APCh. 7 - Prob. 2APCh. 7 - Evaluating the UFO and FIFO Choice When Costs Are...Ch. 7 - Prob. 4APCh. 7 - Prob. 1CPCh. 7 - Prob. 2CPCh. 7 - Prob. 3CPCh. 7 - Prob. 4CPCh. 7 - Using Financial Reports: Interpreting Effects of...Ch. 7 - Making a Decision as a Financial Analyst: Analysis...Ch. 7 - Evaluating an Ethical Dilemma: Earnings, Inventory...Ch. 7 - Prob. 1CC
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education