Exercise 4-16A (Algo) Effect of sales returns and allowances and freight costs on the journal, ledger, and financial statements: Perpetual system LO 4-2, 4-4, 4-6, 4-7

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Powell Company began the Year 2 accounting period with $18,000 cash, $60,200 inventory, $49,400 common stock, and $28,800 retained earnings. During Year 2, Powell experienced the following events:

1. Sold merchandise that cost $37,000 for $75,500 on account to Prentise Furniture Store.
2. Delivered the goods to Prentise under terms FOB destination. Freight costs were $395 cash.
3. Received returned goods from Prentise. The goods cost Powell $1,980 and were sold to Prentise for $3,970.
4. Granted Prentise a $1,000 allowance for damaged goods that Prentise agreed to keep.
5. Collected partial payment of $53,600 cash from accounts receivable.

Exercise 4-16A (Algo) Part a

Record the events in general journal format

a) event 1 A - Sold merchandise for $75,500 on account to Prentise Furniture Store.

b) event 1B- Record the Cost of goods sold of $37,000 on sale.

c) event 2 - Delivered the goods to Prentise under terms FOB destination. Freight costs were $395 cash.

d) event 3A - Received returned goods from Prentise, which were sold to Prentise for $3,970.

e) event 3b - Record the Cost of $1,980 on goods returned.

f) event 4 - Granted Prentise a $1,000 allowance for damaged goods that Prentise agreed to keep.

g) event 5 - Collected partial payment of $53,600 cash from accounts receivable.