Reference no: EM132609078

Question 1: How do gains and losses differ from revenues and expenses? How are they similar?

Question 1: Downton Company had the following business events during for October, its first month of operation. The company uses the perpetual inventory system.

1) Oct. 1 Issued $15,000 of common stock to investors.

2) Oct. 2 Purchased $12,500 of merchandise on account with the terms 2/10, n/30.

3) Oct. 4 Returned $1,250 of defective merchandise from the Oct. 2 purchase.

4) Oct. 10 Paid the amount due on the merchandise purchased on Oct. 2.

5) Oct. 3 Sold merchandise that cost $9,000 for $17,000 on account with the terms 1/10, n/30.

6) Oct. 5 Paid freight of $100 on goods sold to customers shipped FOB destination.

7) Oct. 12 Received cash from customers in settlement of the Oct. 3 sale.

Required:

a. Record the events in general journal format

b. Post the events to accounts shown under an accounting equation.