Question & Answer: The following supplementary records summarize Tesla Company's merchandising activities fo…..

The following supplementary records summarize Tesla Companys merchandising activities for year 2017 (it uses a perpetual inventory system). Cost of merchandise sold to customers in sales transactions Merchandise inventory, December 31, 2816 Invoice cost of merchandise purchases, gross amount Shrinkage determined on December 31, 2817 Cost of transportation-in Cost of merchandise returned by customers and restored to inventory Purchases discounts received Purchases returns and allowances s 245,8e 35,574 251, 174 798 2,512 2,488 2,809 4,588 Record the summarized activities in the T-accounts below. Merchandise Inventory Cost of Goods Sold

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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.

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