Question 6.IP: The following transactions were completed by Montrose Compan......
The following transactions were completed by Montrose Company during May of the current year. Montrose Company uses a perpetual inventory system.
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.
5. Purchased merchandise on account from Kramer Co., $8,500, terms FOB destination, 1/10, n/30.
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 merchandise sold was $1,125.
8. Purchased offi ce supplies for cash, $150.
10. Returned merchandise purchased on May 5 from Kramer Co., $1,300.
13. Paid Floyd Co. on account for purchase of May 3, less discount.
May 14. Purchased merchandise for cash, $10,500.
15. Paid Kramer Co. on account for purchase of May 5, less return of May 10 and discount.
16. Received cash on account from sale of May 6 to C. F. Howell Co., less discount.
19. Sold merchandise on MasterCard credit cards, $2,450. The cost of the merchandise sold was $980.
22. Sold merchandise on account to Comer Co., $3,480, terms 2/10, n/30. The cost of the merchandise sold was $1,400.
24. Sold merchandise for cash, $4,350. The cost of the merchandise sold was $1,750.
25. Received merchandise returned by Comer Co. from sale on
May 22, $1,480. The cost of the returned merchandise was $600.
31. Paid a service processing fee of $140 for MasterCard sales.
Instructions
1. Journalize the preceding transactions.
2. Journalize the adjusting entry for merchandise inventory shrinkage, $3,750.
1. May 3 Merchandise Inventory 4,120
Accounts Payable—Floyd Co. 4,120
5 Merchandise Inventory 8,500
Accounts Payable—Kramer Co. 8,500
6 Accounts Receivable—C. F. Howell Co. 2,800
Sales 2,800
[$4,000 – (30% × $4,000)]
6 Cost of Merchandise Sold 1,125
Merchandise Inventory 1,125
8 Office Supplies 150
Cash 150
10 Accounts Payable—Kramer Co. 1,300
Merchandise Inventory 1,300
13 Accounts Payable—Floyd Co. 4,120
Merchandise Inventory 80
Cash 4,040
[$4,000 – (2% × $4,000) + $120]
14 Merchandise Inventory 10,500
Cash 10,500
15 Accounts Payable—Kramer Co. 7,200
Merchandise Inventory 72
Cash 7,128 [($8,500 – $1,300) × 1% = $72;
$8,500 – $1,300 – $72 = $7,128]
16 Cash 2,744
Sales Discounts 56
Accounts Receivable—C. F. Howell Co. 2,800
19 Cash 2,450
Sales 2,450
19 Cost of Merchandise Sold 980
Merchandise Inventory 980
22 Accounts Receivable—Comer Co. 3,480
Sales 3,480
22 Cost of Merchandise Sold 1,400
Merchandise Inventory 1,400
24 Cash 4,350
Sales 4,350
May 24 Cost of Merchandise Sold 1,750
Merchandise Inventory 1,750
25 Sales Returns and Allowances 1,480
Accounts Receivable—Comer Co. 1,480
25 Merchandise Inventory 600
Cost of Merchandise Sold 600
31 Credit Card Expense 140
Cash 140
2. May 31 Cost of Merchandise Sold 3,750
Merchandise Inventory 3,750
Inventory shrinkage.