Horne Inc. and Sperling Renovations Ltd. both sell goods and use the perpetual inventory system. The company had $3,000 of merchandize inventory at the start of its fiscal year, January 1, 2016. During the year, the company had only the following transactions:
May Horne sold $4,000 of merchandize on account to Sperling
5 Renovations Ltd. for terms 2/10, net 30. Cost of merchandize to Horne from its supplier was $2,500.
7 Sperling returned $500 of merchandize; Horne issued a credit memo. (Cost of merchandize to Horne was $300)
15 Horne received the amount due from Sperling Renovations Ltd.
A physical count and valuation of merchandize inventory at May 31, the fiscal year-end, showed $700 of goods on hand.
Required: Prepare journal entries to record the above transactions and adjustment(include general ledger account numbers and brief descriptions):
1. In the records of Horne Inc.
2. In the records of Sperling Renovations Ltd.