Question

Journalize the following transactions for Lewis 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. August 10 Sold goods costing $5,160 to Henderson Company on account, $8,600, terms 4/10, n/30. August 16 Henderson Company was granted an allowance of $2,150 for returned merchandise that was previously purchased on account. The returned goods are damaged and have no scrap value. August 20 Received the amount due from Henderson Company.
Required:
prepare journal entry.

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

1. Accounts receivable Dr, $8,600

        To Sales $8,600

(Being sales made is recorded)

2. Cost of goods sold Dr,$5,160

           To Merchandise inventory $5,160

(Being cost of goods sold is recorded)

3. Sales return and allowances Dr, $2,150

        To Accounts receivable $2,150

(Being return of the merchandise is recorded)

4. Merchandise inventory Dr, $1,290 ($2,150 × $5,160 ÷ $8,600)

      To Cost of goods sold $1,290

(Being cost of merchandise returned is recorded)

5. Cash Dr, $6,450 ($8,600 - $2,150)

      To Accounts receivable $6,450

(Being receipt of cash iks recorded)