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24 February, 17:30

At the beginning of July, CD City has a balance in inventory of $2,950. The following transactions occur during the month of July. July 3 Purchase CDs on account from Wholesale Music for $1,850, terms 2/10, n/30. July 4 Pay cash for freight charges related to the July 3 purchase from Wholesale Music, $110. July 9 Return incorrectly ordered CDs to Wholesale Music and receive credit, $200. July 11 Pay Wholesale Music in full. July 12 Sell CDs to customers on account, $4,900, that had a cost of $2,550. July 15 Receive full payment from customers related to the sale on July 12. July 18 Purchase CDs on account from Music Supply for $2,650, terms 2/10, n/30. July 22 Sell CDs to customers for cash, $3,750, that had a cost of $2,050. July 28 Return CDs to Music Supply and receive credit of $210. July 30 Pay Music Supply in full. Assuming that CD City uses a perpetual inventory system, record the transactions.

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Answers (1)
  1. 24 February, 17:50
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    Answer and Explanation:

    The Journal entries is shown below:-

    1. Merchandise Inventory Dr, $1,850

    To Accounts payable $1,850

    (Being inventory is recorded)

    2. Merchandise Inventory Dr, $110

    To Cash $110

    (Being cash paid is recorded)

    3. Accounts payable Dr, $200

    To Merchandise Inventory $200

    (Being return inventory is recorded)

    4. Accounts Payable Dr, $1,650 ($1,850 - $200)

    Inventory Dr, $33 ($1,650 * 2%)

    To Cash $1,617

    (Being cash paid is recorded)

    5. Accounts receivable Dr, $4,900

    To Sales revenue $4,900

    (Being sales revenue is recorded)

    6. Cost of goods sold Dr, $2,550

    To Merchandise Inventory $2,550

    (Being cost of goods sold is recorded)

    7. Cash Dr, $4,900

    To Accounts receivable $4,900

    (Being cash receipt is recorded)

    8. Inventory Dr, $2,650

    To Accounts payable $2,650

    (Being inventory is recorded)

    9. Cash Dr, $3,750

    To Sales revenue $3,750

    (Being cash receipt is recorded)

    10. Cost of goods sold Dr, $2,050

    To Merchandise Inventory $2,050

    (Being cost of goods sold is recorded)

    11. Accounts payable Dr, $210

    To Merchandise Inventory $210

    (Being inventory is recorded)

    12. Accounts payable Dr, $2,440 ($2,650 - $210)

    To Cash $2,440

    (Being cash is recorded)
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