Prior Company buys merchandise on account from Wood Company. The selling price o

Question

Prior Company buys merchandise on account from Wood Company. The selling price of the goods is $900 and the cost of goods is $630. Both companies use perpetual inventory systems. Journalize the transactions on the books of both companies.

Prior Company

Wood Company

BE5-2 Prior Company buys merchandise on account from Wood Company. The selling price of the goods is $900 and the cost of goods is $630. Both companies use perpetual inventory systems. Journalize the transactions on the books of both companies.

Explanation / Answer

PRIOR COMPANY

1) MERCHANDISE INVENTORY AC DR. $900

TO ACCOUNT PAYABLE ACC $900

WOOD COMPANY

1) ACCOUNT RECEVABLE ACC DR. $900

TO SALES ACC $900

2) COST OF GOODS SOLD ACC DR $630

TO MERCHANDISE INVENTORY ACC $630

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