Chapter 5 & 6 Accounting for Merchandising Businesses (15) The company below used the perpetual inventory method. Record the journal entries for each of the below transactions: 1. May 3. Purchased merchandise on account from Floyd Co., $4,000, terms FOB shipping point, 2/10, n/30, with prepaid freight of $120 added to the invoice. 2. May 5. Purchased merchandise on account from Kramer Co., $8,500, terms FOB destination, 1/10, n/30. 3. May 6. Sold merchandise on account to C. F. Howell Co., list price $4,000, trade discount 30%, terms 2/10, n/30. The cost of the goods sold was $1,125. 4. May 10. Returned merchandise purchased on May 5 from Kramer Co., $1,300. 5. May 13. Paid Floyd Co. on account for purchase of May 3. 6. May 14. Purchased merchandise for cash, $10,500. 7. May 15. Paid Kramer Co. on account for purchase of May 5, less return of May 10. 8. May 16. Received cash on account from sale of May 6 to C. F. Howell Co. 9. May 19. Sold merchandise on MasterCard credit cards, $2,450. The cost of the goods sold was $980. 10. May 22. Sold merchandise for cash to Comer Co., $3,480. The cost of the goods sold was $1,400. 11. May 24. Sold merchandise on account to Smith Co., $4,350. The cost of the goods sold was $1,750. 12. May 25. Refunded Comer Co. $1,480 for returned merchandise from sale on May 22. The cost of the returned merchandise was $600. 13. May 31. Paid a service processing fee of $140 for MasterCard sales. 14. May 31. The unadjusted balance of Inventory was determined to be $119,000. A count performed indicated that inventory on hand was $115,000. Record the adjustment to inventory for the difference in count. 15. May 31. The lower of cost of market is used by the company in recording ending inventory. At May 31, inventory is $115,000 based on a cost-flow assumption and after adjustments to reconcile the inventory on hand to the cost. However, $20,000 of the inventory on hand is related to an outdated product where sales are very slow. Management has advised us to write down the sales price of the item; cumulatively all the related items are deemed to be worth $14,000. Record the lower of cost or market adjustment to inventory.

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