Accounting for Inventory Orders, Purchases, Sales, Returns, and Discounts
On October 1, the Business Students Society (BSS) placed an order for 110 golf shirts at a unit cost of $27, under terms 3/10, n/30. The order was received on October 10, but 20 golf shirts had been damaged in shipment. On October 11, the damaged golf shirts were returned. On October 12, the BSS complained that the remaining golf shirts were slightly defective so the supplier granted a $230 allowance. The BSS paid for the golf shirts on October 13. During the first week of October, the BSS received student and faculty orders for 90 golf shirts, at a unit price of $48.00, on terms 3/10, n/30. The golf shirts were delivered to these customers on October 18. Unfortunately, customers were unhappy with the golf shirts, so BSS permitted them to be returned or given an allowance of $8 per shirt. Half of the golf shirts were returned on October 21, and the remaining 45 customers were granted the allowance on account on October 22. The customers paid their remaining balances during the week of October 25.
Required:
1.Prepare journal entries for the transactions described above, using the date of each transaction as its reference. Assume BSS uses perpetual inventory accounts. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
1.Record the placement of the order for golf shirts.
2.Record the inventory purchased on account.
3.Record the return of damaged inventory.
4.Record the allowance received for the defective inventory purchased.
5.Record the payment in full.
6.Record the sales revenue on account.
7.Record the cost of goods sold.
8.Record the return of unsatisfactory merchandise sold.
9.Record the cost of goods returned.
10.Record the allowance granted for the defective inventory sold.
11.Record the customers payments in full.
2.Report the financial effects of the above transactions in a multistep income statement for the month ended October 31. Assume operating expenses, other than cost of goods sold, are $180 and income tax expense is $150.
3.Determine the percentage of net sales that is available to cover operating expenses other than cost of goods sold.