Acc100Alekswk5part2.docx

Journalize the following transactions for Robinson Company. 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.
September 6 Sold goods costing $7,200 to Cooper Company forcash, $12,000.
September 12 Cooper Company returned undamaged merchandise, purchased on September 6, for a cash refund, $790.
September 12
There are two journal entries recorded on this date. First, we must account for the return of cash to the customer at the retail price of
the returned goods, $790. Second, we must account for the return of merchandise at its cost, $474.
Entry 1: 
DebitSales Returns and Allowances:
The return is recorded by increasing acontra-revenue account, Sales Returns and Allowances. Theoretically, the Sales account 
could have been decreased. However, many entities keep a separate record of returned goods for further analysis. Sales Returns 
and Allowances are debited (increased) for the retail price of the returned goods, $790.
Credit Cash: 
Since the original sale was for cash, the company is returning cash to the customer. Cash is credited (decreased) for the retail price 
of the returned goods, $790.
Entry 2:
Debit Merchandise Inventory:
Since the returned goods were not damaged, there is an additional entry required to reflect the increase of Merchandise Inventory 
by the cost of the merchandise returned. Merchandise Inventory is debited (increased) for the cost of the inventory returned. To 
determine the cost, remember that on September 6, when the merchandise was originally sold, the cost of the merchandise was 
60% of the sales (retail) price ($7,200/$12,000 = 60%). To determine the cost of inventory returned, multiply 60% by $790, the retail 
price of the return: 60% x $790 = $474.
Credit Cost of Goods Sold:
Since they sold goods were returned, Cost of Goods Sold (COGS) must be credited (decreased) for the cost of the returned goods, 
$474.
Note: If the returned merchandise is fully damaged with no value, then the second journal entry for September 12 will not be 
required           
Part 10
Journalize the following transactions for Ross Company using thegross methodof accounting forsales discounts. Assume 
aperpetual inventory system. Also, assume a constant gross profit ratio for all items sold. Make sure to enter the day for each 
separate transaction.
August 5 Sold goods costing $6,000 to Bailey Companyon account, $10,000,terms2/10, n/30.
August 11 Bailey Company was granted anallowanceof $2,400 for returned merchandise that was previously purchased on 
account. Thereturned goodsare in perfect condition.
August 16 Received the amount due from Bailey Company. 
August 11
There are two journal entries recorded on this date. First, we must account for the reduction of Accounts Receivable due to the 
return of merchandise by the customer, at the retail price, $2,400. Second, we must account for the return of merchandise at its 

cost, $1,440.
Entry 1:
DebitSales Returns and Allowances:
The return is recorded by increasing acontra-revenue account, Sales Returns and Allowances. Theoretically, the Sales account 
could have been decreased. However, many entities keep a separate record of returned goods for further analysis. Sales Returns 
and Allowances is debited (increased) for the retail price of the returned goods, $2,400.
Credit Accounts Receivable:
Due to the return, the customer owes less. Accounts Receivable is credited (decreased) for the retail price of the returned goods, 
$2,400.
Entry 2:
Debit Merchandise Inventory:
Since the returned goods were not damaged, there is an additional entry required to reflect the increase in inventory from the 
merchandise returned. Merchandise Inventory is debited (increased) for the cost of the inventory returned. To determine the cost, 
remember that on August 5, when the merchandise was originally sold, the cost of the merchandise was 60% of the sales (retail) 
price ($6,000/$10,000=60%). To determine the cost of the inventory returned, multiply 60% by $2,400, the retail price of the return: 
60% x $2,400 = $1,440.
Credit Cost of Goods Sold (COGS):
Cost of Goods Sold (COGS) is credited (decreased) for the cost of the returned goods, $1,440.
Note: If the returned merchandise is fully damaged with no value, then the second journal entry on August 11 will not be required.
August 16
We must record the amount received from Bailey Company.
The customer owes the company $7,600 ($10,000 - $2,400). Since the payment is made after the ten-daydiscount period, there will
be nocash discountgiven.
Debit Cash:
The company receives the balance owed to it. Cash is debited (increased) for the amount received, $7,600.
Credit Accounts Receivable:
When payment is made, Accounts Receivable will be reduced by the amount owed. Accounts Receivable is credited 
(decreased) for the amount owed, $7,600. 
Journalize the following transactions for Rogers 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.
April 4 Sold goods costing $3,000 to Brown Companyon account, $5,000,terms5/10, n/30.
April 10 Brown Company was granted anallowanceof $300 for returned merchandise that was previously purchased on account.
Thereturned goodsare damaged and have no scrap value.
April 14 Received the amount due from Brown Company.
April 10
We must record the return of merchandise that Brown Company had previously purchased on account, $300.
DebitSales Returns and Allowances:
The return is recorded by increasing a contra-revenue account, Sales Returns and Allowances. Theoretically, the Sales account 

could have been decreased. However, many entities keep a separate record of returned goods for further analysis. Sales Returns

and Allowances is debited (increased) for the retail price of the returned goods, $300.

Credit Accounts Receivable:

Due to the return, the customer owes less. Accounts Receivable is credited (decreased) for the retail price of the returned goods,

$300.

Since the returned goods were fully damaged, there is no additional entry required. If the returned goods had value, there would be

an additional entry debiting (increasing) Merchandise Inventory and crediting (decreasing) Cost of Goods Sold (COGS) to reflect the

increase in inventory from the merchandise returned.

April 14

We must record the amount received from Brown Company.

The customer owes the company $4,700 ($5,000 - $300). There are three parts to this journal entry:

Debit Cash:

The company receives the difference between the amount owed and thecash discountgiven. Cash is debited (increased) for the

amount received, $4,465.

DebitSales Discounts:

The amount of the discount is recorded in a contra-sales (acontra-revenue) account. Theoretically, Sales could have been debited.

However, many companies choose to separately keep track of discounts given. The amount of the discount is computed by

multiplying the discount percentage by the amount owed (5% × $4,700). Sales Discounts is debited (increased) for $235.

Credit Accounts Receivable:

When payment is made, Accounts Receivable will be reduced by the total amount owed (without consideration of the discount).

Thetermsof the sale were 5/10, n/30. Since the company was paid within 10 days, the customer will receive the cash discount. The

amount of the discount is computed on the net sale, the sale less the return, $4,700. Accounts Receivable is credited (decreased)

for the amount owed, $4,700.

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