Smith Inc. uses the perpetual inventory system and the gross method for recording both purchase and...

 

 
 
 

Transcribed Image Text:

Smith Inc. uses the perpetual inventory system and the gross method for recording both purchase and sales discounts. All purchases and sales of inventory are on account with terms 2/15, n/30. Smith Inc. had the following select transactions occur during October and November of 2019: Oct 1--- Purchased inventory from Dunning Inc. costing $30,000, terms 2/15, n/30. Goods were shipped F.O.B. shipping point. Oct 1- Paid $400 cash to UPS for freight related to the above purchase. Freight charges are not eligible for the discount. Oct 6--- Returned inventory costing $2,000 back to Dunning Inc. The return occurred before the supplier was paid the original invoice amount. Oct 10- Paid Dunning Inc. for the remaining amount still owed. (Note: There was no beginning balance in the subsidiary ledger account for Dunning Inc.) Oct 25-- Sold inventory having a sales price of $8,000 and a cost of $2,000, terms 2/15, n/30. Nov 5- The customer from the sale on Oct 25 returned inventory with an original sales price of $1,000 and a cost of $200 back to Smith Inc. Assume Smith does not estimate its sales returns and allowances. Nov 7-- The above customer paid Smith the remaining balance they owe. Required: Using proper formatting for your journal entries, record each of the above transactions in chronological order in the general journal that appears on the next page. Explanations are not needed. Students: The number of lines shown in this general journal are not indic- ative of how many you will necessarily need. You may add more if neces- sary. Entries should be completed in chronological order. In addition, a check figure is provided below. Date Debit Credit Oct 1 Oct 1 Oct 6 Oct 10 Oct 25 Nov 5 Nov 7 Check figure: The effect on the company's gross margin from the above entries is a positive $5,060. Accounting Check✓ Post the above transactions and verify the "Accounts Receivable" and "Accounts Payable" account balances are zero. Check your entries and/or calculations if these account balances are not equal to zero. Please note errors can still occur even when accounting checks work out. Smith Inc. uses the perpetual inventory system and the gross method for recording both purchase and sales discounts. All purchases and sales of inventory are on account with terms 2/15, n/30. Smith Inc. had the following select transactions occur during October and November of 2019: Oct 1--- Purchased inventory from Dunning Inc. costing $30,000, terms 2/15, n/30. Goods were shipped F.O.B. shipping point. Oct 1- Paid $400 cash to UPS for freight related to the above purchase. Freight charges are not eligible for the discount. Oct 6--- Returned inventory costing $2,000 back to Dunning Inc. The return occurred before the supplier was paid the original invoice amount. Oct 10- Paid Dunning Inc. for the remaining amount still owed. (Note: There was no beginning balance in the subsidiary ledger account for Dunning Inc.) Oct 25-- Sold inventory having a sales price of $8,000 and a cost of $2,000, terms 2/15, n/30. Nov 5- The customer from the sale on Oct 25 returned inventory with an original sales price of $1,000 and a cost of $200 back to Smith Inc. Assume Smith does not estimate its sales returns and allowances. Nov 7-- The above customer paid Smith the remaining balance they owe. Required: Using proper formatting for your journal entries, record each of the above transactions in chronological order in the general journal that appears on the next page. Explanations are not needed. Students: The number of lines shown in this general journal are not indic- ative of how many you will necessarily need. You may add more if neces- sary. Entries should be completed in chronological order. In addition, a check figure is provided below. Date Debit Credit Oct 1 Oct 1 Oct 6 Oct 10 Oct 25 Nov 5 Nov 7 Check figure: The effect on the company's gross margin from the above entries is a positive $5,060. Accounting Check✓ Post the above transactions and verify the "Accounts Receivable" and "Accounts Payable" account balances are zero. Check your entries and/or calculations if these account balances are not equal to zero. Please note errors can still occur even when accounting checks work out.

Answer rating: 100% (QA)

Under Perpetual inventory system Gross method Journal Entries Dat... View the full answer