Recording Purchase and Sales Transactions

Raymond Company and Geeslin Company both use a perpetual inventory system. The following transactions occurred during the month of January:

Jan. 1		Raymond purchased $5,000 of merchandise on account from Geeslin with credit terms of 2/10, n/30. The cost of the merchandise was $3,750. Assume that Geeslin uses the net method to record sales discounts.
8		Raymond returned $500 of themerchandise to Geeslin. The cost of the merchandise returned was $375.
10		Raymond paid invoices totaling $3,000 to Geeslin for the merchandise purchased on January 1.
30		Raymond paid Geeslin the balance due.

Required:

For a compound transaction, if an amount box does not require an entry, leave it blank.

Question Content Area

Prepare the journal entries to record these transactions on the books of Raymond.

Jan. 1	Accounts PayableAccounts ReceivableCashInventorySales RevenueInventory	Inventory
	Accounts PayableAccounts ReceivableCashInventorySales RevenueAccounts Payable		Accounts Payable
	(Purchased inventory on credit)
Jan. 8	Accounts PayableAccounts ReceivableCost of Goods SoldInventorySales RevenueAccounts Payable	Accounts Payable
	Accounts PayableAccounts ReceivableCost of Goods SoldInventorySales RevenueInventory		Inventory
	(Returned merchandise)
Jan. 10	Accounts PayableAccounts ReceivableCashInventorySales RevenueAccounts Payable	Accounts Payable	Accounts Payable
	Accounts ReceivableCashPurchasesSale DiscountsSales Returns and AllowancesCash	Cash	Cash
	Accounts PayableCost of Goods SoldInventoryPurchase DiscountsSales Returns and AllowancesInventory	Inventory	Inventory
	(Recorded payment within discount period)
Jan. 30	Accounts PayableAccounts ReceivableCashInventorySales RevenueAccounts Payable	Accounts Payable
	Accounts PayableAccounts ReceivableCashCost of Goods SoldInventoryCash		Cash
	(Recorded payment outside of discount period)

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Consider whether the transaction is from the perspective of the buyer or seller. From the buyer's perspective, the historical cost principle implies that inventory cost will include the purchase price of the inventory plus any cost of bringing the goods to a salable condition and location. From the seller's perspective, the sale or return of inventory requires two journal entriesone to record the revenue portion of the transaction and one to record the expense (and inventory) portion of the transaction.

Question Content Area

Prepare the journal entries to record these transactions on the books of Geeslin.

Jan. 1	Accounts PayableAccounts ReceivableInventorySales DiscountsSales RevenueAccounts Receivable	Accounts Receivable
	Accounts ReceivableCost of Goods SoldInventorySales RevenueSales Revenue		Sales Revenue
	(Record sale to customer)
Jan. 1	Accounts PayableAccounts ReceivableCashCost of Goods SoldInventoryCost of Goods Sold	Cost of Goods Sold
	Accounts PayableAccounts ReceivableCost of Goods SoldInventorySales RevenueInventory		Inventory
	(Recorded cost of merchandise sold)
Jan. 8	Accounts ReceivableCost of Goods SoldInventorySales RevenueSales Revenue	Sales Revenue
	Accounts PayableAccounts ReceivableCost of Goods SoldInventorySales RevenueAccounts Receivable		Accounts Receivable
	(Recorded return of merchandise)
Jan. 8	Accounts PayableAccounts ReceivableCost of Goods SoldInventorySales RevenueInventory	Inventory
	Accounts ReceivableCashCost of Goods SoldInventorySales RevenueCost of Goods Sold		Cost of Goods Sold
	(Recorded cost of merchandise returned)
Jan. 10	Accounts ReceivableCashCost of Goods SoldInventorySales RevenueCash	Cash
	Accounts PayableAccounts ReceivableCashCost of Goods SoldInventoryAccounts Receivable		Accounts Receivable
	(Recorded receipt within discount period)
Jan. 30	Accounts ReceivableCashCost of Goods SoldInventorySales RevenueCash	Cash	Cash
	Accounts PayableAccounts ReceivableCashInventorySales DiscountsAccounts Receivable	Accounts Receivable	Accounts Receivable
	Accounts PayableCost of Goods SoldInventoryPurchasesSales DiscountsSales RevenueSales Revenue	Sales Revenue	Sales Revenue