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The following transactions are for Blossom Company.
1. On December 3, Blossom Company sold $521,000 of merchandise to Sunland Co., on account, terms 3/10, n/30. The cost of the merchandise sold was $334,400.
2. On December 8, Sunland Co. was granted an allowance of $30,700 for merchandise purchased on December 3.
3. On December 13, Blossom Company received the balance due from Sunland Co.
A. Prepare the journal entries to record these transactions on the books of Blossom Company. Blossom Company uses a perpetual inventory system.
B. Assume that Blossom Company received the balance due from Sunland Co. on January 2 of the following year instead of December 13. Prepare the journal entry to record the receipt of payment on January 2.

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Answer:

A. Dec 3

Dr Account receivable $521,000

Cr Sales revenue $521,000

Dr Cost of goods sold $334,400

Cr Merchandise inventory $334,400

Dec 8

Dr Sales return and allowance $30,700

Cr Account receivable $30,700

Dec 13

Dr Cash $475,591

Dr Sales discount $14,709

Cr Account receivable $490,300

B. Jan 2

Dr Cash $490,300

Cr Account receivable $490,300

Explanation:

A. Preparation of the journal entries to record these transactions on the books of Blossom Company.

Dec 3

Dr Account receivable $521,000

Cr Sales revenue $521,000

(To record sales)

Dr Cost of goods sold $334,400

Cr Merchandise inventory $334,400

(To record cost of goods sold)

Dec 8

Dr Sales return and allowance $30,700

Cr Account receivable $30,700

Dec 13

Dr Cash (490,300*97%) $475,591

Dr Sales discount $14,709

(490,300*3%)

Cr Account receivable ($521,000-$30,700) $490,300

B. Preparation of the journal entry to record the receipt of payment on January 2.

Jan 2

Dr Cash $490,300

Cr Account receivable $490,300

($521,000-$30,700)

(To record the receipt of payment)

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