Reference no: EM132722246

Question -

a. Merchandise inventory on hand at January 1 is $100,000.

b. During the year, the company purchased merchandise on credit from a single supplier for $200,000; terms 2/10, n30. Half of the purchases were paid within the discount period. The other half has not yet been paid.

c. The company paid $8,000 in freight charges on merchandise purchased, fob shipping point.

d. Damaged merchandise with an invoice price of $4,000 was returned to the supplier. A cash refund for the returned amount less discount was received. This merchandise was part of the purchase in transaction b that had been paid within the discount period.

e. Sold merchandise on credit to a customer for $20,000.

f. An allowance of $2,750 was set up because merchandise sold in e was not satisfactory.

g. A cheque for $2,750 was issued to the customer referred to in f.

h. The ending inventory was $80,000.

Required -

1. Prepare journal entries where necessary for each of the transactions. (Omit explanation lines and assume the company uses periodic inventory method.)

2. Calculate the cost of goods sold.

3. Prepare closing entries based on the above information. Include general ledger account numbers and a brief description for each entry.