BA 111 Chapter 9 Merchandise Selling Problem Demo 6 31m 55s 37m 54s

Okay.

You don't want to overstate
your cost of inventory

that you have sold

because now this $2,000 of worth--

So, $2,000 is your markup
of the cost of $1250.

$1250 is your actual cost
that you spend buying that inventory,

which you sold for $2,000.

It was part of the journal entry
that happened on the 20th

when you make a sale on ticket number 53

for total of $3,000 worth.

So, what happened in transaction I
on the 24th

is that Penny, your customer,
returned $2,000

of merchandise that cost you $1,250.

So, you want to credit Penny's account,

so you go to your subsidiary ledger.

You look for Penny.

And now, this is on page number three.
[computer chimes]

of the general ledger.

And this is transaction I, okay?

And what you want to do is,
you want to show--

or in the quick explanation
that you can say is this um, um, issue--

Oops.

Credit memo #1.

So, usually when you issue credit memo
to a customer,

it usually means that
you've given credit back

and they have returned the goods to you,

or you go ahead
and just give them credit without,

um, having the goods return to you.

Okay, in this case, it was $2,000

that you credit the customer.

So, this customer no longer owe you $3,800

because they have received

a $2,000 credit
of goods that they have returned to you.

Okay?

So, that's your I.

And now, as we go down,

there's also something on the 26th for J.

We receive cash from Penny

in payment of March 20th ticket number 53.

And here's a little hint:

don't forget about the credit memo
and discount.

Well, originally the transaction happened
on the 20th.

The terms of sale is 4/10.

So, if Penny paid within ten days,

she gets 4% discount, right?

But Penny, on the 24th,

also returned $2,000 worth of goods.

So, in this journal entry you definitely going to get some cash back.

You're also going to debit sales discount,

which, just like sales return and allowances,

the normal side's on the debit side.

If we do sales revenue,
it's a contra sales revenue account.

You are also going to credit
accounts receivable for Penny.

Now, first of all,

if you look at your subsidiary ledger really quickly,

the ticket number 53 was $3,000.

The credit was $2000.

So, for this transaction alone on ticket 53,

it is only $1,000 worth that Penny owe.

Be really careful and read through the description

or the instruction.

In the instruct-- instruction for J,

you receive cash from Penny
in payment of March 20th.

sales ticket number 53.

There was nothing that stated

that Penny is including payment
of this $800,

the beginning balance that you carry over.

So, right now, in terms of
only looking at ticket 53,

there was--
it was originally for sales of $3,000.

$2000 has been returned to you.

So, what you need to make sure you do is that

there's only $1,000 owed

by customer Penny on ticket number 53.

Okay, so pay attention to what the instructions tell you.

If the instructions tell you,

"Received cash from Penny
for sales ticket 53

"plus um...um,
balance owed from previous month,"

then you would use
this particular balance of $1800.

But in this case,
you're only doing $1,000.

So, the accounts receivable is $1,000

that you want to credit.

And sales discount

is going to be calculated by $3000--

that's the original transaction
that happened on the 20th--

minus $2,000

that Penny returned,

times 4%.

Okay?

So, the amount would be $1,000 times 40--
40 [chuckles]

4%: that's $40.

And so, the cash that you receive
will be $1000

minus the sales discount of $40.

Okay?
So, that's how you would debit cash,

debit sales discount, and credit that $1,000.

So, you credit $1,000,
and this was transaction J,

and you're paying off, umm...

You're paying with discount
for ticket number 53.

Okay?

So now, the balance that Penny owes

is going to be $800,

the balance that was carried over
from the previous month.

For whatever reason, Penny has not yet
paid that previous balance.

Penny just make payment on her
current transaction this month, okay?