Q6SE - Horngren'S Financial And Managerial Accounting

Question

Suppose Piranha.com sells 3,500 books on account for \(17 each (cost of these books is \)35,700) on October 10, 2018 to The Textbook Store. One hundred of these books (cost $1,020) were damaged in shipment, so Piranha.com later received the damaged goods from The Textbook Store as sales returns on October 13, 2018.

Requirements 

1. Journalize The Textbook Store’s October 2018 transactions. 

2. Journalize Piranha.com’s October 2018 transactions. The company estimates sales returns at the end of each month.

Step-by-Step Solution

Answer

Answer

The total of debits and credits for the Textbook Store is $61,200.

The total of debits and credits for Piranha.com is $97,920.

Step 1: Meaning of Journal Entries

The recording of business transactions in the tabular format is called journal entries. It follows the dual aspect concept of accounting and simultaneously reflects the transaction's debit and credit effect and chronologically records financial information.

Step 2: Journal entries for The Textbook Store’s transactions

Date	Accounts and Explanation	Debit ($)	Credit ($)
2018
Oct 10	Merchandise inventory (3,500*$17)	59,500
	Accounts payable		59,500
	(To record the purchases)
Oct 13	Accounts payable (100*$17)	1,700
	Merchandise inventory		1,700
	(To record the return of damaged goods)

Step 3: Journal entries for Piranha.com’s transactions

Date	Accounts and Explanation	Debit ($)	Credit ($)
2018
Oct 10	Accounts receivable	59,500
	Sales revenue		59,500
	(To record the sales)
Oct 10	Cost of goods sold	35,700
	Merchandise inventory		35,700
	(To record the cost of goods sold)
Oct 13	Sales revenue	1,700
	Accounts receivable		1,700
	(To record the sales returns)
Oct 13	Merchandise inventory	1,020
	Cost of goods sold		1,020
	(To record the cost of goods returned)