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Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual in

ID: 2426752 • Letter: H

Question

Hair World Inc. is a wholesaler of hair supplies. Hair World uses a perpetual inventory system. The following transactions (summarized) have been selected for analysis: a. Sold merchandise for cash (cost of merchandise $10,797). $15,200 b. Received merchandise returned by customers as unsatisfactory (but in perfect condition), for cash refund (original cost of merchandise $90). 150 c. Sold merchandise (costing $2,613) to a customer, on account with terms 2/10, n/30. 5,500 d. Collected half of the balance owed by the customer in (c) within the discount period. 2,695 e. Granted a partial allowance relating to credit sales that the customer in (c) had not yet paid 88

Explanation / Answer

Analysis of transactions:

Date

Description

Debit

Credit

a

Cash

       15,200

                      Sales

       15,200

(Being sale made)

a

Cost of goods sold

       10,797

                          Finished goods inventory

       10,797

(To record the cost of goods sold)

b

Sales

             150

                 Cash

             150

(Refund of cash purpose)

b

Finished goods inventory

                90

                           Cost of goods sold

                90

(Return of goods)

c

Accounts receivable

          5,500

                             Sales

          5,500

(To record the sale)

c

Cash

          2,695

                 Accounts receivable

          2,695

(To record collection of cash)

c

Cash

          2,717

Discount allowed

                88

                 Accounts receivable

          2,805

(To record the receipt)

Date

Description

Debit

Credit

a

Cash

       15,200

                      Sales

       15,200

(Being sale made)

a

Cost of goods sold

       10,797

                          Finished goods inventory

       10,797

(To record the cost of goods sold)

b

Sales

             150

                 Cash

             150

(Refund of cash purpose)

b

Finished goods inventory

                90

                           Cost of goods sold

                90

(Return of goods)

c

Accounts receivable

          5,500

                             Sales

          5,500

(To record the sale)

c

Cash

          2,695

                 Accounts receivable

          2,695

(To record collection of cash)

c

Cash

          2,717

Discount allowed

                88

                 Accounts receivable

          2,805

(To record the receipt)