Salem Corp. was incorporated on July 2, 2015 to operate a merchandising business. It uses the perpetual inventory system. All its sales are on account with terms: 2/10, n30. Its transactions during July 2015 are as follows:

July 2	Issued share capital for $5,000 cash.
2	Purchased $3,500 merchandise on account from Blic Pens Ltd. for terms 2/10, n30.
2	Sold $2,000 of merchandise on account to Spellman Chair Rentals Inc. (Cost to Salem: $1,200).
3	Paid Sayer Holdings Corp. $500 for July rent.
5	Paid Easton Furniture Ltd. $1,000 for equipment.
8	Collected $200 for a cash sale made today to Ethan Matthews Furniture Ltd. (Cost: $120).
8	Purchased $2,000 merchandise on account from Shaw Distributors Inc. for terms 2/15, n30.
9	Received the amount due from Spellman Chair Rentals Inc. for the July 2 sale.
10	Paid Blic Pens Ltd. for the July 2 purchase.
10	Purchased $200 of merchandise on account from Peel Products Inc. for terms n30.
15	Sold $2,000 of merchandise on account to Eagle Products Corp. (Cost: $1,300).
15	Purchased $1,500 of merchandise on account from Bevan Door Inc. for terms 2/10, n30.
15	Received a memo from Shaw Distributors Inc. to reduce accounts payable by $100 for defective merchandise included in the July 8 purchase.
16	Eagle Products Corp. returned $200 of defective merchandise which was scrapped (Cost to Salem: $150).
20	Sold $3,500 of merchandise on account to Aspen Promotions Ltd. (Cost: $2,700).
20	Paid Shaw Distributors Inc. for half the purchase made July 8.
24	Received half the amount due from Eagle Products Corp. in partial payment for the July 15 sale.
24	Paid Bevan Doors Ltd. for the purchase made July 15.
26	Sold $600 merchandise on account to Longbeach Sales Ltd. (Cost: $400).
26	Purchased $800 of merchandise on account from Silverman Co. for terms 2/10, n30.
31	Paid Speedy Transport Co. $350 for transportation to Salem's warehouse during the month (all purchases are fob shipping point).

Required:

1. Prepare journal entries to record the July transactions. Include general ledger account numbers and a brief description.
2. Calculate the unadjusted ending balance in merchandise inventory.
3. Assume the merchandise inventory is counted at July 31 and assigned a total cost of $2,400. Prepare the July 31 adjusting entry.

Answer rating: 100% (QA)

Solution Question 1 Date Accounts Title Dr Cr Jul02 Cash 5000 Common Stock 5000 Be common sto... View the full answer