Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 5 Accounting for Merchandise Operations 247

d. Purchased $2,000 of merchandise from Loew Co. on account, terms n/30.

e. Received a check for the balance owed from the return in (c), after deducting for the pur-

chase in (d).

A sale of merchandise on account for $4,000 is subject to a 7% sales tax. (a) Should the sales tax

be recorded at the time of sale or when payment is received? (b) What is the amount of the sale?

(c) What is the amount debited to Accounts Receivable? (d) What is the title of the account to

which the $280 is credited?

Journalize the entries to record the following selected transactions:

a. Sold $9,000 of merchandise on account, subject to a sales tax of 8%. The cost of the mer-

chandise sold was $6,300.

b. Paid $9,175 to the state sales tax department for taxes collected.

Superior Co., a furniture wholesaler, sells merchandise to Beta Co. on account, $11,500, terms

2/15, n/30. The cost of the merchandise sold is $6,900. Superior Co. issues a credit memoran-

dum for $900 for merchandise returned and subsequently receives the amount due within the

discount period. The cost of the merchandise returned is $540. Journalize Superior Co.’s entries

for (a) the sale, including the cost of the merchandise sold, (b) the credit memorandum, includ-

ing the cost of the returned merchandise, and (c) the receipt of the check for the amount due

from Beta Co.

Based on the data presented in Exercise 5-28, journalize Beta Co.’s entries for (a) the purchase,

(b) the return of the merchandise for credit, and (c) the payment of the invoice within the dis-

count period.

What is the normal balance of the following accounts: (a) Cost of Merchandise Sold,

(b) Merchandise Inventory, (c) Sales, (d) Sales Discounts, (e) Sales Returns and Allowances,

(f) Transportation Out?

Jaguar Inc.’s perpetual inventory records indicate that $584,000 of merchandise should be on

hand on July 31, 2007. The physical inventory indicates that $560,000 of merchandise is actually

on hand. Journalize the adjusting entry for the inventory shrinkage for Jaguar Inc. for the year

ended July 31, 2007.

Exercise 5-26

Sales tax

Goal 5

Exercise 5-27

Sales tax transactions

Goal 5

Exercise 5-28

Sales-related transactions

Goals3, 6

Exercise 5-29

Purchase-related transactions

Goals4, 6

Exercise 5-30

Normal balances of merchan-
dise accounts

Goals3, 4, 5, 6

Exercise 5-31

Adjusting entry for merchan-
dise inventory shrinkage

Goal 7