Question 4 (B) - (7.5 Marks)

Understanding Retail Purchases, Sales, Inventory and GST

This exercise is to make sure you understand how to record buying and selling of inventory, and the recording of GST (10%) in each transaction.

The business is called Joshi Mercedes.

The system for recording inventory transactions is the perpetual system.

The business is a Mercedes car dealership in Bathinda, Punjab.

Amounts include GST unless otherwise stated.

The following diagram explains the terms for who pays freight on buying purchases in.

FOB terms determine who pays the freight:

seller ----------------> Buyer seller-------------------> Buyer

buyer owns the good seller owns the good

buyers owns the freight seller owns the freight

Date	Transaction
3/7/19	Purchased $300,000 (including GST) of new Mercedes cars (inventory) on credit under terms of 10/30, n/60 and FOB (Free on Board) delivery point.
7/7/19	Returned one car which cost $50,000 including GST that was purchased on 3 July 2019.
9/7/19	Paid freight on 3 July 2019 purchase of $30,000 including GST.
10/7/19	Sold two cars for $150000 including GST on credit. Payment terms were 2/15 n/30. These cars cost the business $100,000, net (excluding) of GST.
12/7/19	Paid for the purchases on 3/7/19, less the return and less the discount received.
16/7/19	Granted a sales allowance of $20,000 on the 10/7/19 sale.
23/7/19	Received the cash from the customer for the sale on 10/7/19 in full, less the sales allowance and less the discount allowed.

You are required to prepare journal entries for the above transactions and narratives for each journal.

The account to be used to record the GST included in the GST Clearing .