Course Name: intermediate accounting 1

Credit hours : 3 hours

Semester/Academic year: Fall/2023-2024
Section : 1
 Section one
Question one
On may 4 , Al nasr company purchased merchandise
(inventory) from Johnson company for 3,800
Terms 2/10 , n/30. Fob shipping point.

On may 6 , Al nasr company paid freight costs of 150 for

carrier company on merchandise purchased from
Johnson company.

On may 8 , Al nasr company returned damaged

merchandise (goods) costing 200 to Johnson company .

On may 10 , Al nasr company find out defective goods

and decided to keep the goods after being granted a 100
allowance from Johnson company.
On may 14 , Al nasr company paid the amount due to
Johnson company in full.
Required : prepare the journal entries in the books of
Al nasr company using the perpetual inventory system
 Solution
May 4
Merchandise inventory 3800
Account payable 3800
May 6
Merchandise inventory 150
Cash 150
May 8
Account payable 200
Merchandise inventory 200
May 10
Account payable 100
Merchandise inventory 100
May 14
Account payable 3500
Cash 3430
Merchandise inventory 70
A/P =3800-200-100=3500
Discount = 3500 X 2% = 70 Cash paid = 3500 -70 =3430
Now cost of goods (inventory) purchased
Increase by purchase and freight in costs
Decrease by purchase return, allowance and discount
So cost of goods ( inventory) purchased =
= 3800 + 150 – 200 -100- 70 = 3580 balance.
Question two
On may 4 , Johnson company sold merchandise
(inventory) to Al nasr company for 3,800 (assuming cost
of merchandise sold is 2400)Terms 2/10 , n/30
Fob destination.

On may 6 , freight costs of 150 was paid by Johnson

company.

On may 8 , Johnson company accepted 200 of returned

goods from Al nasr company (assuming cost of them is
120) and assuming goods were not defective

On may 10 , Al nasr company discovered inferior goods

and decided to keep the goods after being granted a 100
allowance from Johnson company.

On may 14 , Johnson company received the balance due

from Al nasr company in full.
Required : prepare the journal entries in the books of
Johnson company using the perpetual inventory system
 Solution
May 4 ,
Account receivable 3800
Sales revenues 3800
Cost of goods sold 2400
Merchandise inventory 2400
May 6 ,
Freight out(delivery expense) 150
Cash 150
May 8 ,
Sales return and allowance 200
Account receivable 200
Merchandise inventory 120
Cost of goods sold 120
May 10 ,
Sales return and allowance 100
Account receivable 100
May 14 ,
Cash 3430
Sales discount 70
Account receivable 3500

A/R= 3800 -200-100 =3500

Sales discount = 3500 X 2% =70
Cash received = 3500 – 70 =3430
So we can find that
Sales revenues 3800
(-) sales return and allowance (200 + 100)
(-) sales discount (70)
= net sales = 3430

Note : if goods are returned because they are damaged

or defective, goods should be recorded by the fair value
in the cost of goods sold entry
The main equation =
= beginning inventory + cost of goods purchased = cost of
goods available for sale – end inventory = cost of goods
sold

Cost of goods purchased = net purchase + freight in costs

Net purchase = purchase – purchase return and

allowance – purchase discount