Cornerstone Exercise 6-21 (Algorithmic) Recording Sales Transactions Mathis Comp

Question

Cornerstone Exercise 6-21 (Algorithmic) Recording Sales Transactions Mathis Company and Reece Company use the perpetual inventory system. The following transactions occurred during the month of April a. On April 1, Mathis Company purchased merchandise on account from Reece Company with credit terms of 2/10, n/30. The selling price of the merchandise was $3,400, and the cost of the merchandise sold was $2,450 b. On April 1, Mathis paid freight charges of $100 cash to have the goods delivered to its warehouse. c. On April 8, Mathis returned $1,000 of the merchandise which had originally cost Reece $700. d. On April 10, Mathis paid Reece the balance due. Required: Prepare the journal entries to record these transactions on the books of Reece Company. Assume that Reece uses the net method to record sales on account. For a compound transaction, if an amount box does not require an entry, leave it blank. April 1 Accounts Recelvable Sales Revenue (Recorded sale on account) Cost of Goods Sold Inventory (Recorded cost of merchandise sold) Sales Revenue Sales Discounts x (Recorded return of merchandise) April 1 April 8 April 8 Inventory Cost of Goods Sold Recorded cost of merchandise retuned) April 10 Cost of Goods Sold y Inventory x Received customer payment within discount period)

Explanation / Answer

Date Accounts Title Debit Credit Working Apr-01 Accounts receivables $                       3,332.00 Sales net of discount = $3400 - 2% = 3332 Sales revenue $              3,332.00 (sales on account) Apr-01 Cost of Goods Sold $                       2,450.00 Inventory $              2,450.00 (cost of merchandise sold) Apr-08 Sales Revenue $                           980.00 Sales net of discount = $1000 - 2% = 980 Accounts receivables $                  980.00 (merchandise returned) Apr-08 Inventory $                           700.00 Cost of Goods Sold $                  700.00 (cost of merchandise returned) Apr-10 Cash $                       2,352.00 [Sales - Sales return] Accounts receivables $              2,352.00 [3332 - 980] (Cash received)

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