Accounting

Question

Waters Hardware Store completed the following merchandising transactions in the month of May. At the beginning of May, Water’s ledger showed Cash of $10,858 and Common Stock of $10,858.

May 1 Purchased merchandise on account from Hauke Wholesale Supply for $8,400, terms 1/10, n/30.
2 Sold merchandise on account for $5,500, terms 2/10, n/30. The cost of the merchandise sold was $4,125.
5 Received credit from Hauke Wholesale Supply for merchandise returned $300.
9 Received collections in full, less discounts, from customers billed on May 2.
10 Paid Hauke Wholesale Supply in full, less discount.
11 Purchased supplies for cash $1,222.
12 Purchased merchandise for cash $4,208.
15 Received $312 refund for return of poor-quality merchandise from supplier on cash purchase.
17 Purchased merchandise from Friedrich Distributors for $4,200, terms 2/10, n/30.
19 Paid freight on May 17 purchase $339.
24 Sold merchandise for cash $7,465. The cost of the merchandise sold was $5,565.
25 Purchased merchandise from Fasteners Inc. for $1,086, terms 3/10, n/30.
27 Paid Friedrich Distributors in full, less discount.
29 Made refunds to cash customers for returned merchandise $149. The returned merchandise had cost $112.
31 Sold merchandise on account for $1,737, terms n/30. The cost of the merchandise sold was $1,127.


Journalize the transactions using a perpetual inventory system.

Answer 1

Using a perpetual inventory system, inventory will be updated after each purchase or sale. Each transaction above should be journalized with that in mind. For example, the entries for the first two transactions:

 

May 1   Dr. Inventory                          8,400

                 Cr.   Accounts Payable                      8,400

 

May 2   Dr. Accounts Receivable            5,500

                 Cr. Sales                                          5,500

            Dr. Cost of Goods Sold              4,125

                 Cr. Inventory                                   4,125