Question

On October 5, Cullumber Company buys merchandise on account from Marin Company. The selling price of the goods is $5,790, and the cost to Marin Company is $3,520. On October 8, Cullumber returns defective goods with a selling price of $920 and a scrap value of $340. Record the transactions on the books of Marin Company, assuming a perpetual approach. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.)

Answer 1

Answer:

Inventory                         Dr.$5,790

Accounts Payable                          Cr.$5,790

(To record purchase of inventory on credit basis)

No Entry for Cost to Marin Company i.e $3,520 we are doing accounting for cullumber

Accounts Payable     Dr.$920

Inventory                                       Cr.$920

(To record purchase return)

No entry for Scrap Value i.e $340

Explanation:

Under perpetual inventory system, the records are update regularly for every sales and purchase accounting transaction as compared to periodic inventory where at year end accounts are updated.

No entry is required for marin cost as we will record only our purchase price for cullumber company. Scrap value is also irrelevant as we are not selling to marin rather returning the inventory we purchased from it.