Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 5 Accounting for Merchandise Operations 245

Journalize the entries for the following transactions:

a. Sold merchandise for cash, $6,900. The cost of the merchandise sold was $4,830.

b. Sold merchandise on account, $7,500. The cost of the merchandise sold was $5,625.

c. Sold merchandise to customers who used MasterCardandVISA, $10,200. The cost of the

merchandise sold was $6,630.

d. Sold merchandise to customers who used American Express, $7,200. The cost of the

merchandise sold was $5,040.

e. Paid an invoice from City National Bank for $675, representing a service fee for process-

ing MasterCard and VISA sales.

f. Received $6,875 from American Express Companyafter a $325 collection fee had been

deducted.

During the year, sales returns and allowances totaled $235,750. The cost of the merchandise re-

turned was $141,450. The accountant recorded all the returns and allowances by debiting the

sales account and crediting Cost of Merchandise Sold for $235,750.

Was the accountant’s method of recording returns acceptable? Explain. In your explanation,

include the advantages of using a sales returns and allowances account.

After the amount due on a sale of $7,500, terms 2/10, n/eom, is received from a customer within

the discount period, the seller consents to the return of the entire shipment. The cost of the mer-

chandise returned was $4,500. (a) What is the amount of the refund owed to the customer? (b)

Journalize the entries made by the seller to record the return and the refund.

The debits and credits for three related transactions are presented in the following T accounts.

Describe each transaction.

Exercise 5-15

Sales-related transactions,
including the use of credit
cards

Goal 3

Exercise 5-16

Sales returns and allowances

Goal 3

Exercise 5-17

Sales-related transactions

Goal 3

Exercise 5-18

Sales-related transactions

Goal 3

Exercise 5-19

Sales-related transactions

Goal 3

CASH

(5) 9,405

SALES

(1) 12,000

ACCOUNTS RECEIVABLE

(1) 12,000 (3) 2,500

(5) 9,500

SALES DISCOUNTS

(5) 95

MERCHANDISE INVENTORY

(4) 1,625 (2) 7,800

SALES RETURNS AND ALLOWANCES

(3) 2,500

COST OF MERCHANDISE SOLD

(2) 7,800 (4) 1,625

Merchandise is sold on account to a customer for $18,000, terms FOB shipping point, 3/10, n/30.

The seller paid the transportation costs of $375. Determine the following: (a) amount of the sale,

(b) amount debited to Accounts Receivable, (c) amount of the discount for early payment, and

(d) amount due within the discount period.