The following supplementary records summarize Tesla Company’s merchandising activities for year 2017 (it uses a perpetual inventory system). Record the summarized activities in the T-accounts below. Following are the merchandising transaction for dollar store. Nov. 1 Dollar store purchases merchandise for $2,200 on terms of 2/5, n/30, FOB shipping point, invoice date November 1. 5 dollar store pays cash for the November 1 purchase. 7 Dollar store discovers and returns $200 of defective merchandise purchased on November 5, for a cash refund. 10 Dollar store pays $110 cash for transportation costs for the November 1 purchase. 13 Dollar store sells merchandise for $2,376 with terms n/30. the cost of the merchandise is $1,188. 16 Merchandise is returned to the Dollar store from the November 13 transcation. The returned items are priced at $260 and cost $130: the items were not damaged and were returned to inventory. Journalize the above merchandising transactions for the Dollar Store assuming it uses a perpetual inventory system and the gross method.
Expert Answer
Tesla Company
T-accounts
Merchandise Inventory | |||
Debit | Credit | ||
Beginning balance | 35574 | Cost of goods sold | 245000 |
Purchases | 251174 | Shrinkage | 790 |
Transportation-in | 2512 | Purchase discounts | 2009 |
Sales returns | 2400 | Purchase returns and allowances | 4500 |
Balance | 39361 | ||
Cost of Goods Sold | |||
Debit | Credit | ||
Inventory sold | 245000 | ||
Shrinkage | 790 | ||
Balance | 245790 |
Note: Shrinkage may be debited to a separate shrinkage expense account which is then closed to the cost of goods sold. Here the shrinkage has been directly debited to the cost of goods sold account.