Journalize the following inventory merchandise transactions for the seller and the buyer, assuming that both uses the perpetual inventory system. Refer to the Chart of Accounts for exact wording of account titles. Dec. 1 Seller sold merchandise on account to the buyer, $4,750, terms 2/10, net 30, FOB shipping point. The cost of the merchandise is $2,850. The seller prepays the freight of $75. 3 Buyer returns $700 of merchandise as defective. The cost of the merchandise is $420. 8 Buyer pays within the discount period.

See explanation section.

Explanation:

Requirement A

December 1 Accounts receivable Debit $4,655

Sales revenue                                 Credit  $4,655

Calculation: [4,750 - (4,750 × 2%)] = $4,655

To record the sales on account.

December 1  Cost of goods sold Debit = $2,850

Merchandise inventory                 Credit = $2,850

As the company uses a perpetual inventory system; therefore, the company will give the cost of goods sold.

Delivery expense Debit = $75

Cash                      Credit = $75

To record delivery expenses paid by the seller.

Requirement B

Refunds payable       Debit = $700

Accounts receivable Credit = $700

To record the return from the buyer.

Merchandise inventory         Debit = $420

Estimated returns inventory Credit = $420

To record the cost of goods sold of that returned inventory.

Cash                           Debit = $4,655

Accounts receivable Credit = $4,655

As the customer paid within the discount period, they received a 2% discount according to the term and conditions.

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