Reference no: EM132694655
Problem - The following transactions were completed by Montrose Company during May of the current year. Montrose uses a perpetual inventory system.
May 3. Purchased merchandise on account from Floyd Co., $4,000, terms FOB shipping point, 2/10, n/30, with prepaid freight of $120 added to the invoice.
May 5. Purchased merchandise on account from Kramer Co., $8,500, terms FOB destination, 1/10, n/30.
May 6. Sold merchandise on account to C. F. Howell Co., list price $4,000, trade discount 30%, terms 2/10, n/30. The cost of the goods sold was $1,125.
May 8. Purchased office supplies for cash, $150.
May 10. Returned merchandise purchased on May 5 from Kramer Co., with an invoice amount of $1,300.
May 13. Paid Floyd Co. on account for purchase of May 3.
May 14. Purchased merchandise for cash, $10,500.
May 15. Paid Kramer Co. on account for purchase of May 5, less return of May 10.
May 16. Received cash on account from sale of May 6 to C. F. Howell Co.
May 19. Sold merchandise on MasterCard credit cards, $2,450. The cost of the goods sold was $980.
May 22. Sold merchandise for cash to Comer Co., $3,480. The cost of the goods sold was $1,400.
May 24. Sold merchandise on account to Smith Co., $4,350. The cost of the goods sold was $1,750.
May 25. Refunded Comer Co. $1,480 for returned merchandise from sale on May 22. The cost of the returned merchandise was $600.
May 31. Paid a service processing fee of $140 for MasterCard sales.
Instructions -
1. Journalize the preceding transactions.
2. Journalize the adjusting entry for inventory shrinkage, $3,750.
3. Journalize the adjusting entries for estimated customer refunds and returns. Assume that sales of $3,000 are estimated to be refunded and inventory costing $1,800 is estimated to be returned.