P 2. Vargo Company engaged in the following transactions in August 2011: Aug. 7
ID: 2367605 • Letter: P
Question
P 2. Vargo Company engaged in the following transactions in
August 2011:
Aug. 7 Sold merchandise on credit to Ken Smith, terms n/30, FOB shipping point, $3,000 (cost, $1,800).
8 Purchased merchandise on credit from Novak Company, terms n/30, FOB shipping point, $6,000.
9 Paid Smart Company for shipping charges on merchandise purchased on August 8, $254.
10 Purchased merchandise on credit from Mara's Company, terms n/30, FOB shipping point, $9,600, including $600 freight costs paid by Sewall.
14 Sold merchandise on credit to Rose Milito, terms n/30, FOB shipping point, $2,400 (cost, $1,440).
14 Returned damaged merchandise received from Novak Company on August 8 for credit, $600.
17 Received check from Ken Smith for his purchase of August 7.
19 Sold merchandise for cash, $1,800 (cost, $1,080).
20 Paid Mara's Company for purchase of August 10.
21 Paid Novak Company the balance from the transactions of August 8 and August 14.
24 Accepted from Rose Milito a return of merchandise, which was put back in inventory, $200 (cost, $120).
Required
Prepare entries in journal form (refer to the Review Problem) to record the transactions, assuming use of the perpetual inventory system.
Explanation / Answer
7: Debit Accounts Recievable (Ken Smith) for 3000 and credit Sales for 3000; also debit Cost of Merchandise Sold for 1800 and credit Merchandise Inventory for 1800.
8: Debit Merchandise Inventory for 6000 and credit Account Payable (Novak Company) for 6000.
9: Debit Shipping Expense for 254 and credit Cash for 254
10: Debit Merchandise Inventory for 9600 and credit Accounts Payable (Mara's Company) for 9600
14: Debit Accounts Recievable (Rose Milito) for 2400 and credit Sales 2400; also debit Cost of Merchandise Sold for 1440 and credit Merchandise Inventory for 1440
14: Debit Accounts Payable (Novak Company) 600 and credit Merchandise Inventory 600
17: Debit Cash for 3000 and credit Accounts Recievable (Ken Smith) for 3000
19: Debit Cash for 1800 and credit Sales for 1800; also debit Cost of Merchandise Sold for 1080 and credit Merchandise Inventory for 1080
20: Debit Accounts Payable (Mara's Company) 9600 and credit cash for 9600
21: Debit Accounts Payable (Novak Company) 5400 and credit Cash for 5400
24: Debit Sales Returns and Allowances for 200 and credit Accounts Recievable (Rose Milito) 200; also debit Merhcandise Inventory for 120 and credit Cost of Merchandise Sold for 120.
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