On October 1, Benji’s Bicycle Store had an inventory of 20 ten speed bicycles at

Question

On October 1, Benji’s Bicycle Store had an inventory of 20 ten speed bicycles at a cost of $200 each. During the month of October, the following transactions occurred.

Instructions:

Prepare the journal entries to record the transactions assuming the company uses a perpetual inventory system.

Oct. 4 Purchased 40 bicycles at a cost of $200 each from Monrue Bicycle Company, terms 1/10, n/30. Oct. 6 Sold 25 bicycles to Team Wisconsin for $330 each, terms 2/10, n/30. Oct. 7 Received credit from Monrue Bicycle Company for the return of 2 defective bicycles. Oct. 13 Issued a credit memo to Team Wisconsin for the return of a defective bicycle. Oct. 14 Paid Monroe Bicycle Company in full, less discount.

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit Oct 4 Merchandise inventory (200*40) 8000 Account payable 8000 (To record purchase) Oct 6 Account receivable (25*330) 8250 Sales revenue 8250 (To record sale) oct 7 Account payable (2*200) 400 Merchandise inventory 400 (To record received credit) Oct 13 Merchandise inventory 330 Account receivable 330 (To record issue credit memo) Oct 14 Account payable 7600 Cash (7600*99/100) 7524 Merchandise inventory 76 (To record paid )

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