BES-2 Record the following transactions on the books of Essex Corp, which uses a

Question

BES-2 Record the following transactions on the books of Essex Corp, which uses a perpetual inventory system. (a) On July 1, Essex Corp, sold merchandise on account to Cambridge Inc. for $42,000, terms 2/10, n/30. The cost of he merchandise sold was $30,000. (b) On July 8, Cambridge returned merchandise worth $7.200 to Essex. Its original cost was $4,320. The merchandise was restored to inventory (c) On July 9, Cambridge paid for the merchandise. (d) Assume now that Cambridge did not pay on July 9, as indicated in transaction (). At the end of August, Eser adal one month's interest to Cambridges account for the overdue receivable. Essex ch Round calculations to the nearest dollar arges 24% per year on ove

Explanation / Answer

a)

Accounts Receivable Dr 42000

Sales Cr 42000

Cost of goods sold Dr 30000

Inventory Cr 30000

b)

Sales return Dr 7200

Accounts receivable Cr 7200

Inventory Dr 4320

Cost of goods sold Cr 4320

c)

Cash Dr 34104

Discount Dr 696 (34800*2%)

Accounts receivable Cr 34800

d)

Interest @24% for 1 month on 34800 = 34800*24%*1/12 = 696

Journal:

Accounts receivable Dr 696

Interest revenue Cr 696

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