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Sales-Related Transactions using Perpetual Inventory System

The following selected transactions were completed by Green Lawn Supplies Co., which sells irrigation supplies primarily to wholesalers and occasionally to retail customers:

July 1.	Sold merchandise on account to Landscapes Co., $33,450, terms FOB shipping point, n/eom. The cost of merchandise sold was $20,000.
2.	Sold merchandise for $86,000 plus 8% sales tax to retail cash customers. The cost of merchandise sold was $51,600.
5.	Sold merchandise on account to Peacock Company, $17,500, terms FOB destination, 1/10, n/30. The cost of merchandise sold was $10,000.
8.	Sold merchandise for $112,000 plus 8% sales tax to retail customers who used VISA cards. The cost of merchandise sold was $67,200.
13.	Sold merchandise to customers who used MasterCard cards, $96,000. The cost of merchandise sold was $57,600.
14.	Sold merchandise on account to Loeb Co., $16,000, terms FOB shipping point, 1/10, n/30. The cost of merchandise sold was $9,000.
15.	Received check for amount due from Peacock Company for sale on July 5.
16.	Issued credit memo for $3,000 to Loeb Co. for merchandise returned from sale on July 14. The cost of the merchandise returned was $1,800.
18.	Sold merchandise on account to Jennings Company, $11,350, terms FOB shipping point, 2/10, n/30. Paid $475 for freight and added it to the invoice. The cost of merchandise sold was $6,800.
24.	Received check for amount due from Loeb Co. for sale on July 14 less credit memo of July 16.
28.	Received check for amount due from Jennings Company for sale of July 18.
31.	Received check for amount due from Landscapes Co. for sale of July 1.
31.	Paid Black Lab Delivery Service $8,550 for merchandise delivered during July to customers under shipping terms of FOB destination.
Aug. 3.	Paid Hays Federal Bank $3,770 for service fees for handling MasterCard and VISA sales during July.
10.	Paid $41,260 to state sales tax division for taxes owed on sales.

Required:

Journalize the entries to record the transactions of Green Lawn Supplies Co. For a compound transaction, if an amount box does not require an entry, leave the box blank.

Date	Account	Debit	Credit
July 1-sale	Accounts Receivable-Landscapes Co.
	Sales

Date	Account	Debit	Credit
July 1-cost

Date	Account	Debit	Credit
July 2-sale

Date	Account	Debit	Credit
July 2-cost

Date	Account	Debit	Credit
July 5-sale

Date	Account	Debit	Credit
July 5-cost

Date	Account	Debit	Credit
July 8-sale

Date	Account	Debit	Credit
July 8-cost

Date	Account	Debit	Credit
July 13-sale

Date	Account	Debit	Credit
July 13-cost

Date	Account	Debit	Credit
July 14-sale

Date	Account	Debit	Credit
July 14-cost

Date	Account	Debit	Credit
July 15

Date	Account	Debit	Credit
July 16-return

Date	Account	Debit	Credit
July 16-cost

Date	Account	Debit	Credit
July 18-sale

Date	Account	Debit	Credit
July 18-freight

Date	Account	Debit	Credit
July 18-cost

Date	Account	Debit	Credit
July 24

Date	Account	Debit	Credit
July 28

Date	Account	Debit	Credit
July 31-collection

Date	Account	Debit	Credit
July 31-freight

Date	Account	Debit	Credit
Aug. 3

Date	Account	Debit	Credit
Aug. 10

Feedback

Journalize these transactions from the seller's perspective using the perpetual inventory system. Discounts are given on the amount owed by the buyer, except for any freight costs.

July 1: Note that FOB shipping point freight is the buyer's expense. Often freight must be prepaid for the carrier to deliver. Two entries are required: (1) for the sale on account and (2) for the cost of the merchandise sold and inventory decrease on the seller's records.

July 2: The sales tax liability is incurred at the time of sale. It is debited when the seller pays the tax to the state. The amount due from the buyer is the sales amount plus the sales tax. Two entries are required: (1) for the sale including sales tax and (2) for the cost of the merchandise sold and inventory decrease on the seller's records.

July 5: Note that FOB destination point freight is the seller's expense and typically is prepaid. Two entries are required for this date: (1) for the sale on account and (2) for the cost of the merchandise sold and inventory decrease on the seller's records.

July 8: The sales tax liability is incurred at the time of sale. It is debited when the seller pays the tax to the state. The amount due from the buyer is the sales amount plus the sales tax. Remember that credit card transactions are recorded as cash sales. Two entries are required: (1) for the sale including sales tax and (2) for the cost of the merchandise sold and inventory decrease on the seller's records.

July 13: Remember that credit card transactions are recorded as cash sales. Two entries are required: (1) for the sale and (2) for the cost of the merchandise sold and inventory decrease on the seller's records.

July 14: Note that FOB shipping point freight is the buyer's expense. Often freight must be prepaid for the carrier to deliver. Two entries are required: (1) for the sale on account and (2) for the cost of the merchandise sold and inventory decrease on the seller's records.

July 18: Note that FOB shipping point freight is the buyer's expense. Often freight must be prepaid for the carrier to deliver, so credit cash for the added freight. Two entries are required: (1) for the sale on account and (2) for the cost of the merchandise sold and inventory decrease on the seller's records.

July 16: The Sales returns and allowances is debited while the credit is applied to the buyer's Accounts Receivable. A second entry increases Merchandise Inventory and reduces the Cost of Merchandise Sold for the return cost.

July 15: Since the invoice was paid within the discount period, the seller deducts 1% of the invoice amount and records it as a debit to Sales Discount, while crediting Accounts Receivable for the total amount of the invoice. The difference between these two accounts is recorded as a debit to Cash.

July 24: The return of merchandise reduces the original invoice amount paid by the buyer. The discount is taken on the amount owed on the merchandise after the return.

July 28: Since the invoice was paid within the discount period, the seller deducts 2% of the invoice amount and records it as a debit to Sales Discount, while crediting Accounts Receivable for the total amount of the invoice. The difference between these two accounts is recorded as a debit to Cash.

July 31: Since no discount is allowed, no discount is recorded. The cash paid is equal to the receivable on the seller's books.

July 31: FOB shipping point freight is the buyer's cost, while FOB destination freight is the seller's expense. Often freight must be prepaid for the carrier to deliver.

Aug. 3: Record the service fee as an expense.

Aug. 10: Since all sales taxes from customer transactions are recorded as a liability, Sales tax payable must be debited when they are paid to the state in cash.

Learning Objective 2.