21. During YR01 and YR02, Macy's Inc. had the following sales-related activity. Event Date 6-1-YR01 7-1-YR01...

Transcribed Image Text:

21. During YR01 and YR02, Macy's Inc. had the following sales-related activity. Event Date 6-1-YR01 7-1-YR01 9-5-YROI 9-8-YR01 12-23-YR01 12-28-YR01 12-31-YR01 12-31-YR01 1-2-YR02 1-4-YR02 1-7-YR02 1-9-YR02 2-1-YR02 9-1-YR02 11-12-YR02 11-14-YR02 12-31-YR02 12-31-YR02 Sold $400 of merchandise on account. This merchandise includes a one-year warranty expiring on 5-31-YR02. Under state law, all sales are subject to a 5% sales tax. Sold $200 of merchandise on account. This merchandise includes a one-year warranty expiring on 6-30-YR02. In addition, the customer paid $60 for an extended warranty covering the one-year period 7-1-YR02 to 6-30-YR03. Under state law, all sales (including extended warranties) are subject to a 5% sales tax. Received a billing of $20 from a third-party service organization for warranty repairs to merchandise sold on 6-1-YR01. • • Paid the third-party billing received on 9-5-YR01. Ordered merchandise under terms 2/10, n/60, FOB destination. The vendor charged a total of $100 for the merchandise (assume no sales tax is levied on this type of transaction). These goods were shipped on 12-26-YR01 (invoice date = 12-26-YR01) and delivered on 1-2-YR02. Ordered merchandise under terms 2/10, n/60, FOB shipping point. The vendor charged a total of $50 for the merchandise (assume no sales tax is levied on this type of transaction). These goods were shipped on 12-30-YR01 (invoice date = 12-30-YR01) and delivered on 1-7-YR02. Estimated that future warranty claims related to merchandise sold would be as follows: Claims related to Assurance Warranties = $40. Claims related to Service (extended) Warranties = $10. As needed, recorded adjusting journal entry related to the extended warranty sold on 7-1-YR01. Received $100 of merchandise ordered on 12-23-YR01. Paid for the merchandise received on 1-2-YR02. Received $50 of merchandise ordered on 12-28-YR01. Paid for the merchandise received on 1-7-YR02 Remitted (paid) sales tax collections to the state government. Sold $300 of merchandise on account. Under state law, all sales are subject to a 5% sales tax. This merchandise includes a one-year warranty expiring on 8-31-YR03. Received a billing of $5 from a third-party service organization for extended warranty repairs to merchandise sold on 7-1-YR01. Paid the third-party billing received on 11-12-YR02. Estimated that future warranty claims related to merchandise sold would be as follows: Claims related to Assurance Warranties = $10. Claims related to Service (extended) Warranties = $6. As needed, recorded adjusting journal entries. REQUIRED: Prepare formal journal entries to record these events and any necessary adjusting journal entries in the YR01 and YR02 accounting records. If no formal journal entry is needed for a given event, provide a brief explanation for the fact that no journal entry is needed. Assume that all general ledger accounts related to these events/transactions have a balance of zero (0) on 1-1-YR01. Company accounting policy is as follows: • Company policy is to record adjusting journal entries once each year at year-end (December 31"). Reversing journal entries are not used by the company. Sales tax is recorded concurrently with sales revenue. Merchandise purchases are recorded using the 'Gross Method'. The company uses a perpetual inventory system. For internal control reasons, company policy prohibits journal entries that include both cash and a nominal account. • The company's yearend is December 31st. Note: For this problem calculate journal entry amounts to the nearest dollar. 12 21. During YR01 and YR02, Macy's Inc. had the following sales-related activity. Event Date 6-1-YR01 7-1-YR01 9-5-YROI 9-8-YR01 12-23-YR01 12-28-YR01 12-31-YR01 12-31-YR01 1-2-YR02 1-4-YR02 1-7-YR02 1-9-YR02 2-1-YR02 9-1-YR02 11-12-YR02 11-14-YR02 12-31-YR02 12-31-YR02 Sold $400 of merchandise on account. This merchandise includes a one-year warranty expiring on 5-31-YR02. Under state law, all sales are subject to a 5% sales tax. Sold $200 of merchandise on account. This merchandise includes a one-year warranty expiring on 6-30-YR02. In addition, the customer paid $60 for an extended warranty covering the one-year period 7-1-YR02 to 6-30-YR03. Under state law, all sales (including extended warranties) are subject to a 5% sales tax. Received a billing of $20 from a third-party service organization for warranty repairs to merchandise sold on 6-1-YR01. • • Paid the third-party billing received on 9-5-YR01. Ordered merchandise under terms 2/10, n/60, FOB destination. The vendor charged a total of $100 for the merchandise (assume no sales tax is levied on this type of transaction). These goods were shipped on 12-26-YR01 (invoice date = 12-26-YR01) and delivered on 1-2-YR02. Ordered merchandise under terms 2/10, n/60, FOB shipping point. The vendor charged a total of $50 for the merchandise (assume no sales tax is levied on this type of transaction). These goods were shipped on 12-30-YR01 (invoice date = 12-30-YR01) and delivered on 1-7-YR02. Estimated that future warranty claims related to merchandise sold would be as follows: Claims related to Assurance Warranties = $40. Claims related to Service (extended) Warranties = $10. As needed, recorded adjusting journal entry related to the extended warranty sold on 7-1-YR01. Received $100 of merchandise ordered on 12-23-YR01. Paid for the merchandise received on 1-2-YR02. Received $50 of merchandise ordered on 12-28-YR01. Paid for the merchandise received on 1-7-YR02 Remitted (paid) sales tax collections to the state government. Sold $300 of merchandise on account. Under state law, all sales are subject to a 5% sales tax. This merchandise includes a one-year warranty expiring on 8-31-YR03. Received a billing of $5 from a third-party service organization for extended warranty repairs to merchandise sold on 7-1-YR01. Paid the third-party billing received on 11-12-YR02. Estimated that future warranty claims related to merchandise sold would be as follows: Claims related to Assurance Warranties = $10. Claims related to Service (extended) Warranties = $6. As needed, recorded adjusting journal entries. REQUIRED: Prepare formal journal entries to record these events and any necessary adjusting journal entries in the YR01 and YR02 accounting records. If no formal journal entry is needed for a given event, provide a brief explanation for the fact that no journal entry is needed. Assume that all general ledger accounts related to these events/transactions have a balance of zero (0) on 1-1-YR01. Company accounting policy is as follows: • Company policy is to record adjusting journal entries once each year at year-end (December 31"). Reversing journal entries are not used by the company. Sales tax is recorded concurrently with sales revenue. Merchandise purchases are recorded using the 'Gross Method'. The company uses a perpetual inventory system. For internal control reasons, company policy prohibits journal entries that include both cash and a nominal account. • The company's yearend is December 31st. Note: For this problem calculate journal entry amounts to the nearest dollar. 12

Answer rating: 100% (QA)

Here are the journal entries for the transactions 61YR01 DR Accounts Receivable 400 Sales Revenue 40... View the full answer