At the beginning of July, CD City has a balance in inventory of $3,150. The foll

Question

At the beginning of July, CD City has a balance in inventory of $3,150. The following transactions occur during the month of July. July 3 Purchase CDs on account from Wholesale Music for $2,050, terms 2/10, n/30. July 4 Pay freight charges related to the July 3 purchase from Wholesale Music, $120. July 9 Return incorrectly ordered CDs to Wholesale Music and receive credit, $200. July 11 Pay Wholesale Music in full. July 12 Sell CDs to customers on account, $5,300, that had a cost of $2,750. July 15 Receive full payment from customers related to the sale on July 12. July 18 Purchase CDs on account from Music Supply for $2,850, terms 2/10, n/30. July 22 Sell CDs to customers for cash, $3,950, that had a cost of $2,250. July 28 Return CDs to Music Supply and receive credit of $250. July 30 Pay Music Supply in full.

Explanation / Answer

Date Account title Debit credit july 3 Inventory 2050 Accounts payable 2050 [inventory purchased ] july 4 Inventory 120 cash 120 [freight paid on purchase] july 9 Accounts payable 200 Inventory 200 [inventory returned ] july 11 Accounts payable (2050-200) 1850 Inventory     (1850*.02) 37 Cash      (1850-37) 1813 [Being payment made to payables within discount period ] july 12 Accounts receivable 5300 sales 5300 cost of goods sold 2750 Inventory 2750 [being sales made and cost of sales recorded] July 15 cash 5300 Accounts receivable 5300 [being receivables collected] july 18 Inventory 2850 Accounts payable 2850 [being inventory purchased] july 22 cash 3950 sales 3950 cost of good sold 2250 Inventory 2250 [being sales and cost of sales recorded] july 28 Accounts payable 250 Inventory 250 july 30 Accounts payable    (2850 -250) 2600 cash 2600 [being payment made to payables after discount period ]

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