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Sales-Related Transactions using Perpetual Inventory System

The following selected transactions were completed by Green Lawn Supplies Co., which sells irrigation supplies primarily to wholesalers and occasionally to retail customers:

Required:

Journalize the entries to record the transactions of Green Lawn Supplies Co. For a compound transaction, if an amount box does not require an entry, leave the box blank.

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Journalize these transactions from the seller\'s perspective using the perpetual inventory system. Discounts are given on the amount owed by the buyer, except for any freight costs.

July 1: Note that FOB shipping point freight is the buyer\'s expense. Often freight must be prepaid for the carrier to deliver. Two entries are required: (1) for the sale on account and (2) for the cost of the merchandise sold and inventory decrease on the seller\'s records.

July 2: The sales tax liability is incurred at the time of sale. It is debited when the seller pays the tax to the state. The amount due from the buyer is the sales amount plus the sales tax. Two entries are required: (1) for the sale including sales tax and (2) for the cost of the merchandise sold and inventory decrease on the seller\'s records.

July 5: Note that FOB destination point freight is the seller\'s expense and typically is prepaid. Two entries are required for this date: (1) for the sale on account and (2) for the cost of the merchandise sold and inventory decrease on the seller\'s records.

July 8: The sales tax liability is incurred at the time of sale. It is debited when the seller pays the tax to the state. The amount due from the buyer is the sales amount plus the sales tax. Remember that credit card transactions are recorded as cash sales. Two entries are required: (1) for the sale including sales tax and (2) for the cost of the merchandise sold and inventory decrease on the seller\'s records.

July 13: Remember that credit card transactions are recorded as cash sales. Two entries are required: (1) for the sale and (2) for the cost of the merchandise sold and inventory decrease on the seller\'s records.

July 14: Note that FOB shipping point freight is the buyer\'s expense. Often freight must be prepaid for the carrier to deliver. Two entries are required: (1) for the sale on account and (2) for the cost of the merchandise sold and inventory decrease on the seller\'s records.

July 18: Note that FOB shipping point freight is the buyer\'s expense. Often freight must be prepaid for the carrier to deliver, so credit cash for the added freight. Two entries are required: (1) for the sale on account and (2) for the cost of the merchandise sold and inventory decrease on the seller\'s records.

July 16: The Sales returns and allowances is debited while the credit is applied to the buyer\'s Accounts Receivable. A second entry increases Merchandise Inventory and reduces the Cost of Merchandise Sold for the return cost.

July 15: Since the invoice was paid within the discount period, the seller deducts 1% of the invoice amount and records it as a debit to Sales Discount, while crediting Accounts Receivable for the total amount of the invoice. The difference between these two accounts is recorded as a debit to Cash.

July 24: The return of merchandise reduces the original invoice amount paid by the buyer. The discount is taken on the amount owed on the merchandise after the return.

July 28: Since the invoice was paid within the discount period, the seller deducts 2% of the invoice amount and records it as a debit to Sales Discount, while crediting Accounts Receivable for the total amount of the invoice. The difference between these two accounts is recorded as a debit to Cash.

July 31: Since no discount is allowed, no discount is recorded. The cash paid is equal to the receivable on the seller\'s books.

July 31: FOB shipping point freight is the buyer\'s cost, while FOB destination freight is the seller\'s expense. Often freight must be prepaid for the carrier to deliver.

Aug. 3: Record the service fee as an expense.

Aug. 10: Since all sales taxes from customer transactions are recorded as a liability, Sales tax payable must be debited when they are paid to the state in cash.

Learning Objective 2.

July 1.	Sold merchandise on account to Landscapes Co., $33,450, terms FOB shipping point, n/eom. The cost of merchandise sold was $20,000.
2.	Sold merchandise for $86,000 plus 8% sales tax to retail cash customers. The cost of merchandise sold was $51,600.
5.	Sold merchandise on account to Peacock Company, $17,500, terms FOB destination, 1/10, n/30. The cost of merchandise sold was $10,000.
8.	Sold merchandise for $112,000 plus 8% sales tax to retail customers who used VISA cards. The cost of merchandise sold was $67,200.
13.	Sold merchandise to customers who used MasterCard cards, $96,000. The cost of merchandise sold was $57,600.
14.	Sold merchandise on account to Loeb Co., $16,000, terms FOB shipping point, 1/10, n/30. The cost of merchandise sold was $9,000.
15.	Received check for amount due from Peacock Company for sale on July 5.
16.	Issued credit memo for $3,000 to Loeb Co. for merchandise returned from sale on July 14. The cost of the merchandise returned was $1,800.
18.	Sold merchandise on account to Jennings Company, $11,350, terms FOB shipping point, 2/10, n/30. Paid $475 for freight and added it to the invoice. The cost of merchandise sold was $6,800.
24.	Received check for amount due from Loeb Co. for sale on July 14 less credit memo of July 16.
28.	Received check for amount due from Jennings Company for sale of July 18.
31.	Received check for amount due from Landscapes Co. for sale of July 1.
31.	Paid Black Lab Delivery Service $8,550 for merchandise delivered during July to customers under shipping terms of FOB destination.
Aug. 3.	Paid Hays Federal Bank $3,770 for service fees for handling MasterCard and VISA sales during July.
10.	Paid $41,260 to state sales tax division for taxes owed on sales.

Solution

Date Accounts Debit Credit July 1. Accounts Recievable 33,540 Sales 33,540 July 1. COMS 20,000 Merchandise Inventory 20,000 July 2. Cash 92,880 Sales 86,000 Sales Tax Payable 6,880 July 2. COMS 51,600 Merchandise Inventory 51,600 July 5. Accounts Receivable 17,325 Sales 17,325 July 5. COMS 10,000 Merchandise Inventory 10,000 Jul 8. Sales 112,000 Sales Tax Payable 8,960 Cash 120,960 Jul 8. Merchandise Inventory 67,200 COMS 67,200 Jul 13. Sales Revenue 96000 Cash 96000 Jul 13. Merchandise Inventory 57600 COMS 57600 Jul 14. Sales Revenue 16000 Accounts Receivable (Loeb Co) 16000 Jul 14. Merchandise Inventory 9000 COMS 9000 Jul 15. Accounts Receivable (Peacock Co) 17500 Cash 17325 Sales Discount 175 Jul 16. Sales Return   3000 Accounts Receivable (Loeb Co) 3000 Merchandise Inventory 1800 COMS 1800 Jul 18. Sales Revenue                    11,350 11350 Accounts Receivable (Jennigs Co) 11350                       475 Cash                          475 475 Freight Receivable 475 Merchandise Inventory 6800 COMS 6800 Jul 24. Accounts Receivable (Loeb Co) 13000 Cash   12870 Sales Discount 130 Jul 28. Accounts Receivable (Jennigs Co) 11350 Cash 11598 Freight Receivable 475 Sales Discount 227 Jul 31. Accounts Payable-Freight out 8550 Cash 8550 Jul 31. Accounts Receivable (Landscapes Co) 33450 Cash 33450 Aug 3. Cash 3770 Visa Service Fees 3770 Aug 10. Sales Tax Payable 41260 Cash 41260