Forrest's Cycle Shop uses a perpetual inventory accounting system and the gross method of accounting for sales had the following transactions during the month of July: July 3Sold merchandise to a customer on credit for $600, terms 2/10, n30. The cost of the merchandise sold was $350.July 4Sold merchandise to a customer for cash of $425. The cost of the merchandise was $250.July 6Sold merchandise to a customer on credit for $1,300, terms 2/10, n/30. The cost of the merchandise sold was $750.July 8The customer from July 3 returned merchandise with a selling price of $100. The cost of the merchandise returned was $55.July 15The customer from July 6 paid the full amount due, less any appropriate discounts earned.July 31The customer from July 3 paid the full amount due, less any appropriate

discounts earned.Prepare the required journal entries that Forrest's Cycle Shop must make to record these transactions.

What will be an ideal response?


July 3Accounts receivable……………………………600
Sales………………………………………. 600
Cost of goods sold……………………………..350
Merchandise inventory……………………. 350

July 4Cash…………………………………………… 425
Sales………………………………………..425
Cost of goods sold…………………………….. 250
Merchandise inventory……………………. 250

July 6Accounts receivable………………………….. 1,300
Sales………………………………………. 1,300
Cost of goods sold…………………………….    750
Merchandise inventory……………………. 750

July 8Sales returns and allowances………………….100
Accounts receivable……………………….100
Merchandise inventory………………………... 55 
Cost of goods sold………………………… 55

July 15Cash………………………………………....... 1,274
Sales discounts……………………………....... 26
Accounts receivable………………………..1,300
Calculation: Discount = $1,300 * .02 = $26 

July 31Cash…………………………………………… 500
Accounts receivable……………………….500

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