Q13SE - Horngren'S Financial And Managerial Accounting

Question

Journalize the following sales transactions for King Company. Explanations are not required.

Apr. 1 King Company sold merchandise inventory for \(150. The cost of the inventory was \)90. The customer paid cash. King Company was running a promotion and the customer received a \(20 award at the time of sale that can be used at a future date on any King Company merchandise.

May 15 The customer uses the \)20 award when purchasing merchandise inventory for \(30. The cost of the inventory was \)18. The customer paid cash.

Step-by-Step Solution

Answer

Answer

The total of debits and credits is $318.

Step 1: Meaning of Sales Allowances

In accounting, sales allowances refer to the price reduction facility provided by the business entities to their customers. Such allowances are the expenses and are deducted from the sales revenues generated by the businesses. 

Step 2: Preparation of journal entries

Date	Accounts and Explanation	Debit ($)	Credit ($)
Apr 1	Cash	150
	Sales revenue		150
Apr 1	Cost of goods sold	90
	Merchandise inventory		90
Apr 1	Sales allowance	20
	Accounts receivable
May 15	Accounts payable	30
	Sales revenue		30
May 15	Cost of goods sold	18
	Merchandise inventory		18
May 15	Cash	10
	Accounts receivable		10