Logan Corp applies perpetual inventory record keeping. At the beginning of the y

Question

Logan Corp applies perpetual inventory record keeping. At the beginning of the year, Logan Corp. had $8,000 worth of inventory on hand. Purchases during the year totaled $40,000 on credit terms of 2/15, n/30. Goods were shopped FOB-Shipping point for $300. Upon inspection, goods costing $2,000 were returned. All purchases are paid early to take advantage of the discount. All sales are on account with credit terms of 1/10, n/30. During the year, sales totaled $100,000 on goods costing $38,000, paying $500 In freight costs, FOB-destination, Damaged goods costing $1,900 against $5,000 account. All but one customer paid early to take advantage of the discount. The last customer paid $5,000 on his account (In full). The year-end count was $10,000. Required: Prepare journal entries under the gross method. Required: Prepare journal entries under the net method.

Explanation / Answer

Gross Method Journal Entries Account Debit Credit Inventory      40,300 Accounts payable      40,000 cash 300 Accounts payable        2,000 Inventory        2,000 Accounts payable      38,000 cash      37,240 Inventory            760 accounts receivable    100,000 sales    100,000 sales            950 accounts receivable            950 Freight out            500 cash            500 cost of goods sold      38,000 inventory      38,000 cash      99,050 accounts receivable      99,050 Net Method Journal Entries Inventory      37,540 Accounts payable      37,240 cash 300 Accounts payable      37,240 cash      37,240 account receivable      99,050 sales      99,050 cost of goods sold      38,000 inventory      38,000

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