Culver Warehouse distributes suitcases to retail stores and extends credit terms of n/30 to all of its customers: Culver Warehouse uses a perpetual inventory system the earnings approach. At the end of June its inventory consisted of 30 suitcases purchased at $30 each. During the month of July, the following merchandising transactions occurred: July 1 2 4 10 12 15 18 21 23 30 31 Purchased 50 suitcases on account for $30 each from Trunk Manufacturers, terms n/30, FOB destination The correct company paid $120 freight on the July 1 purchase. Received $150 credit for five suitcases returned to Trunk Manufacturers because they were damaged. Sold 45 suitcases that cost $30 each to Satchel World for $60 each on account. Issued a $300 credit for five suitcases returned by Satchel World because they were the wrong colour. The suitcases were returned to inventory. Purchased 60 additional suitcases from Trunk Manufacturers for $27.50 each, terms n/30, FOB shipping point. Paid $150 freight to AA Trucking Company for merchandise purchased from Trunk Manufacturers Sold 57 suitcases that cost $30 each to Fly-By-Night for $60 each on account. Gave Fly-By-Night a $120 credit for two returned suitcases. The suitcases had been damaged and were sent to the recyclers. Paid Trunk Manufacturers for the July 1 purchase. Received balance owing from Satchel World. Date July 1: July 2 July 4 July 10: Account Titles and Explanation Merchandise Inventory (Purchase on account.) no journal entry required Accounts Payable Merchandise Inventory Sales Returns and Allowances (To record credit for goods returned) Accounts Receivable (To record sales on account.) Debit 1500 DO 10⁰0 150 2700 1350 Credit 1509 C 150 2700 1350 July 10 July 12: July 15 July 18 July 21 Cost of Goods Sold Merchandise Inventory (To record cost of goods sold.) Merchandise Inventory Cost of Goods Sold (To record sales return.) Merchandise Inventory Cash (Cost of goods returned.). Merchandise Inventory Cash (Purchase on account.) Accounts Receivable 300 DA DA DO 150 1650 150 3420 300 150 1650 150 July 21 # July 21 July 23 July 30 # July 31 Accounts Receivable sales (To record freight on purchase.) Cost of Goods Sold Merchandise Inventory (To record sales on account.) Sales Returns and Allowances Accounts Receivable (To record cost of goods sold.) Accounts Payable. cash (To record sales return.) cash 3420 1710 120 1350 2400 3420 D 1710 120 135C Question 2 of 3 July 30: July 31 July 31 < (To record cost of goods sold.) > Accounts Payable cash (To record sales return.) cash Accounts Receivable (Payment on account.) 1350 2400 0.75/5 1 135C 2400
