Question

a. Prepare journal entries to record the following transactions of Recycled Fashion retail store. Recycled Fashion uses a perpetual inventory system and the gross method
Mar. 3 Purchased $1,150 of merchandise made from recycled material from GreenWorld Company with credit terms of 2/15, n/60, invoice dated March 3, and FOB shipping point.
4 Paid $75 cash for shipping charges on the March 3 purchase.
5 Returned to GreenWorld unacceptable merchandise that had an invoice price of $150.
18 Paid GreenWorld for the March 3 purchase, net of the discount and the returned merchandise.
19 Purchased $425 of fair trade merchandise from PeopleFirst Corp. with credit terms of 1/10, n/30, invoice dated March 19, and FOB destination.
21 After negotiations, received from PeopleFirst a $25 allowance (for scuffed merchandise) toward the $425 owed on the March 19 purchase.
29 Sent check to PeopleFirst paying for the March 19 purchase, net of the allowance and the discount.

Answer 1

Answer:

Following is given a solution for your question as required.

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Explanation:

Answer 2

Based the appropriate journal entries to record the transactions are:

Recycled Fashion journal entries

March 3

Debit Merchandise inventory $1,150

Credit Account payable- GreenWorld Company   $1,150

March 4

Debit Merchandise inventory $75

Credit Cash $75

March 5

Debit Account payable- GreenWorld Company $150

Credit  Merchandise inventory $150

March 18

Debit  Account payable- GreenWorld Company $1,000

($1,150-$150)

Credit  Merchandise inventory $20

(2%×$1,000)

Credit Cash $980

[$1,000×(100%-2%)]

March 19

Debit  Merchandise inventory $425

Credit Account payable-PeopleFirst Corp $425

March 21

Debit  Account payable-PeopleFirst Corp $25

Credit  Merchandise inventory $25

March 29

Debit  Account payable- PeopleFirst Corp $400

($425-$25)

Credit  Merchandise inventory $4

[($425-$25)×1%]

Credit Cash $396

[$400×(100%-1%)]

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