Accounting Exercise 5.1 (Accounting in Merchandising Companies)
The following transactions pertain to a business called Luxury Furniture. All transactions took place in the 20X8 accounting period:
1) The owners contributed $6,000 cash and $4,000 of inventory;
2) In addition to inventory provided by the owners, the company purchased
$3,000 of furniture inventory on account;
3) The company incurred and paid $250 cash for transportation expenses
to deliver the goods from Event No.2 to the store;
4) The company returned $500 of furniture inventory because it was not
ready for sale;
5) The company was going to repay the supplier's bill within two weeks
and thus received 3% cash purchase discount;
6) Furniture inventory costing $2,000 was sold for $5,000 on account;
7) The company delivered the furniture sold in Event No.6 to another city
and hired a driver with a truck to do that. This transportation expense
amounted to $670;
8) The the customer from Event No.6 was expected to become a repeat client;
thus, Luxury Furniture decided to provide sales allowance in amount of
$300;
9) Due to a mistake during the recording process, some furniture inventory
from Event No.6 was loaded over the amount ordered. In this connection,
the customer returned and Luxury Furniture accepted $500 of the inventory.
The cost of the returned furniture was $200;
10) The company collected balance due from accounts receivable;
11) Cash was paid to settle the accounts payable balance.
Required:
a) Record transactions to the general journal; and
b) Post transactions to T-accounts.
Assume Luxury Furniture uses perpetual inventory method.
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