Justyna Company engaged in the following transactions in July 2011:
July 1 Sold merchandise to Tina Lands on credit, terms n/30, FOB shipping point, $1,050 (cost, $630).
3 Purchased merchandise on credit from Livomax Company, terms n/30, FOB shipping point, $1,900.
5 Paid Team Freight for freight charges on merchandise received, $145.
8 Purchased merchandise on credit from Arbor Supply Company, terms n/30, FOB shipping point, $1,800, which includes $100 freight costs paid by Arbor Supply Company.
12 Returned some of the merchandise purchased on July 3 for credit, $300.
15 Sold merchandise on credit to John Nuzzo, terms n/30, FOB shipping point, $600 (cost, $360).
17 Sold merchandise for cash, $500 (cost, $300).
18 Accepted for full credit a return from Tina Lands and returned merchandise to inventory, $100 (cost, $60).
24 Paid Livomax Company for purchase of July 3 less return of July 12.
25 Received check from Tina Lands for July 1 purchase less the return on July 18.
1. Prepare journal entries to record these transactions, assuming the company uses the perpetual inventory system.
2. In their published financial statements, most companies call the first line on their income statements “net sales.” Other companies call them “sales.” Do you think these terms are equivalent and comparable? What would be the content of “net sales”? What might be the reason a company uses “sales” instead of “net sales”?