Chapter 8, Problem 9AP

To determine

Prepare the journal entries to record the LKG transactions.

Explanation of Solution

Prepare the journal entries to record the sales for an account.

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 1	Accounts Receivable	1,600
	Sales Revenue		1,600
	(To record the sales on account)

Table (1)

• Accounts receivable is a current asset, and it is increased. Therefore, debit accounts receivable account for $1,600.
• Sales revenue is a component of stockholders’ equity, and it is increased. Therefore, credit sales revenue account for $1,600.

Prepare the journal entry to record cost of goods sold.

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 1	Cost of Goods Sold	1,000
	Merchandised Inventory		1,000
	(To record the cost of goods sold)

Table (2)

• Cost of goods sold is a component of stockholders’ equity and it is decreased. Therefore, debit cost of goods sold account for $1,000.
• Merchandise inventory is a current asset, and it is decreased. Therefore, credit merchandise inventory account for $1,000.

Prepare the journal entry to record credit card sale (subsequent collection)) of $4,800 of processor fee of 1%.

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 2	Accounts receivable  - UM	4,752
	Credit card expense	48
	Sales Revenue		4,800
	(To record the credit card sales.)

Table (3)

Calculate the processor fee.

$\begin{array}{c}\text{Processor Fee = 1\% of \$4,800}\\ \text{= \$48}\end{array}$ (1)

Calculate accounts receivable.

$\begin{array}{c}\text{Account receivable = Sales Amount }-\text{ Processor fee}\\ \text{= \$4,800 }-\text{ \$48}\\ \text{= \$4,752}\end{array}$ (2)

• Accounts receivable is a current asset, and it is increased. Therefore, debit accounts receivable account for $4,752.
• Credit card expense is a component of stockholders’ equity, and it is decreased. Therefore, debit credit card expense account for $48.
• Sales revenue is a component of stockholders’ equity, and it is increased. Therefore, credit sales revenue account for $4,800.

Prepare the journal entry to record cost of goods sold.

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 2	Cost of Goods Sold	3,000
	Merchandised Inventory		3,000
	(To record the cost of goods sold)

Table (4)

• Cost of goods sold is a component of stockholders’ equity and it is decreased. Therefore, debit cost of goods sold account for $3,000.
• Merchandise inventory is a current asset, and it is decreased. Therefore, credit merchandise inventory account for $3,000.

Prepare the journal entry to record sales of $3,600 oil painting to R who paid check.

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 4	Cash	3,600
	Sales Revenue		3,600
	(To record cash sales)

Table (5)

• Cash is a current asset, and it is increased. Therefore, debit cash account for $3,600.
• Sales revenue is a component of stockholders’ equity, and it is increased. Therefore, credit sales revenue account for $3,600.

Prepare the journal entry to record for cost of goods sold.

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 4	Cost of Goods Sold	2,000
	Merchandised Inventory		2,000
	(To record the cost of goods sold)

Table (6)

• Cost of goods sold is a component of stockholders’ equity and it is decreased. Therefore, debit cost of goods sold account for $2,000.
• Merchandise inventory is a current asset, and it is decreased. Therefore, credit merchandise inventory account for $2,000.

Prepare the journal entry to record credit card sale (immediate credit) of $4,000 of processor fee of 2%.

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 5	Cash	3,920
	Credit card expense	80
	Sales Revenue		4,000
	(To record the credit card sale.)

Table (7)

Working notes:

Calculate processor fee.

$\begin{array}{c}\text{Processor Fee = 2\% of \$4,000}\\ \text{= \$80}\end{array}$ (3)

Calculate accounts receivable.

$\begin{array}{c}\text{Account receivable = Sales Amount }-\text{ Processor fee}\\ \text{= \$4,000 }-\text{ \$80}\\ \text{= \$3,920}\end{array}$ (4)

• Cash is a current asset, and it is increased. Therefore, debit cash account for $3,920.
• Credit card expense is a component of stockholders’ equity, and it is decreased. Therefore, debit credit card expense account for $80.
• Sales revenue is a component of stockholders’ equity, and it is increased. Therefore, credit sales revenue account for $4,000.

Prepare the journal entry to record cost of goods sold for $2,600.

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 5	Cost of Goods Sold	2,600
	Merchandised Inventory		2,600
	(To record the cost of goods sold)

Table (8)

• Cost of goods sold is a component of stockholders’ equity and it is decreased. Therefore, debit cost of goods sold account for $2,600.
• Merchandise inventory is a current asset, and it is decreased. Therefore, credit merchandise inventory account for $2,600.

Prepare the journal entry to record for received cash payment from L.

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 6	Cash	1,568
	Sales Discount	32
	Accounts Receivable		1,600
	(To record the receipt of cash from L)

Table (9)

Working notes:

Calculate sales discount.

$\begin{array}{c}\text{Sales Discount = Amount}\text{Due}\times \text{Rate of Discount}\\ \text{=}\text{\$1,600}\times \text{2\% }\\ \text{=}\text{\$32}\end{array}$ (5)

Calculate cash received.

$\begin{array}{c}\text{Cash Received = }\left(\begin{array}{l}\text{Invoice Price }\\ -\text{Sales Discount}\end{array}\right)\\ =\$1,600-\$32\\ =\$1,568\end{array}$ (6)

• Cash is a current asset, and it is increased. Therefore, debit cash account for $1,568.
• Sales discount is a component of stockholders’ equity, and it is decreased. Therefore, debit sales discount for $32.
• Accounts receivable is a current asset, and it is decreased. Therefore, credit accounts receivable account for $1,600.

Prepare the journal entry to record for received cash payment from UM.

Date	Account Title and Explanation	Debit ($)	Credit ($)
June 7	Cash	4,752
	Accounts receivable - UM		4,752
	(To record the collection from credit card company.)

Table (10)

• Cash is a current asset, and it is increased. Therefore, debit cash account for $4,752.
• Accounts receivable is a current asset, and it is decreased. Therefore, credit accounts receivable account for $4,752.