Journalize the following transactions for Rivera Company usi

Journalize the following transactions for Rivera Company using the gross method of accounting for sales discounts. Assume a perpetual inventory system. Also, assume a constant gross profit ratio for all items sold. Make sure to enter the day for each separate transaction. March 5 Sold goods costing $5,100 to Kelly Company on account, $8,500, terms 3/10, n/30 March 11 Kelly Company was granted an allowance of $1,700 for returned merchandise that was previously purchased on account. The returned goods are in perfect condition. March 16 Received the amount due from Kelly Company. Account Title Debit Credit Clear Undo Help

Solution

Rivera Company  

Journal Entries (Amount in $)

Working Notes:-

1) Gross profit on sale to Kelly company = $8,500-$5,100 = $3,400

Gross profit ratio = (Gross profit/Sales)*100 = ($3,400/$8,500)*100 = 40%

Gross Profit in sales returns and allowances = $1,700*40% = $680

Cost of sales returns and allowances = Sale Price - Gross Profit = $1,700-$680 = $1,020

Date	Account Title	Debit	Credit
March 5	Accounts Receivable	8,500
	Sales		8,500
	(To record goods sold on account to Kelly company)
March 5	Cost of goods sold	5,100
	Merchandise Inventory		5,100
	(To record the cost of goods sold to Kelly company)
March 11	Sales returns and allowances	1,700
	Accounts Receivable		1,700
	(To record the sales returns and allowances)
March 11	Merchandise Inventory	1,020
	Cost of goods sold		1,020
	(To record the cost of sales returns and allowances)
March 16	Cash (8,500-1,700)	6,800
	Accounts Receivable		6,800
	(To record the amount received from Kelly company)