Hawkeye Electric Company engaged in the following transactions during July. Journalize the preceding transactions on the books of Hawkeye Electric Company using the perpetual system of inventory.
July 2 – Purchased inventory for cash, $800
July 5 – Purchased store supplies on credit terms of net eom, $600.
July 8 – Purchased inventory of $3,000, plus freight charges of $230. Credit terms are 3/15 n/30.
July 9 – Sold goods for cash $1,200, Hawkeye’s cost of these goods was $700.
July 11 – Returned $200 of the inventory purchased on July 8. It was damaged.
July 12 – Purchased inventory on credit terms of 3/10 n/30, $3,330.
July 14 – Sold inventory on credit terms of 2/10 n/30, $9,600(cost $5,000).
July 16 – Paid utilities expense, $275.
July 20 – Received returned inventory from July 14 sale, $400. Hawkeye shipped the wrong goods by mistake. Hawkeye’s cost of the inventory received was $250.
July 21 – Borrowed the amount owed on the July 8 purchase. Signed a note payable to the bank for $2,946, which takes into account the return of inventory on July 11.
July 23 – Received $6,860 cash in partial settlement of his account from the customer who purchased inventory on July 14. Granted the customer a 2% discount and credited his account receivable for $7,000.
July 30 – Paid for the store supplies purchased on July 5.
To journalize the transactions on the books of Hawkeye Electric Company using the perpetual system of inventory, we need to record each transaction separately.
1. July 2 – Purchased inventory for cash, $800
Since this transaction is paid in cash, we need to record it as follows:
Inventory: Debit $800
Cash: Credit $800
2. July 5 – Purchased store supplies on credit terms of net EOM, $600
Since this transaction is made on credit, we need to record it as follows:
Store Supplies: Debit $600
Accounts Payable: Credit $600
3. July 8 – Purchased inventory of $3,000, plus freight charges of $230. Credit terms are 3/15 n/30.
This transaction involves both the cost of inventory and freight charges. First, we record the cost of inventory:
Inventory: Debit $3,000
Accounts Payable: Credit $3,000
Then, we record the freight charges:
Inventory: Debit $230
Accounts Payable: Credit $230
4. July 9 – Sold goods for cash $1,200. Hawkeye’s cost of these goods was $700.
Since this transaction involves the sale of goods, we need to record it as follows:
Accounts Receivable: Debit $1,200
Sales Revenue: Credit $1,200
Cost of Goods Sold: Debit $700
Inventory: Credit $700
5. July 11 – Returned $200 of the inventory purchased on July 8. It was damaged.
To record the return of inventory, we need to reverse the previous entry:
Accounts Payable: Debit $200
Inventory: Credit $200
6. July 12 – Purchased inventory on credit terms of 3/10 n/30, $3,330.
Since this transaction is made on credit, we need to record it as follows:
Inventory: Debit $3,330
Accounts Payable: Credit $3,330
7. July 14 – Sold inventory on credit terms of 2/10 n/30, $9,600 (Cost $5,000).
To record the sale of inventory, we need to record it as follows:
Accounts Receivable: Debit $9,600
Sales Revenue: Credit $9,600
Cost of Goods Sold: Debit $5,000
Inventory: Credit $5,000
8. July 16 – Paid utilities expense, $275.
Since this transaction involves the payment of an expense, we need to record it as follows:
Utilities Expense: Debit $275
Cash: Credit $275
9. July 20 – Received returned inventory from July 14 sale, $400. Hawkeye shipped the wrong goods by mistake. Hawkeye’s cost of the inventory received was $250.
To record the return of inventory, we need to reverse the previous entry:
Accounts Receivable: Debit $400
Inventory: Credit $400
Then, we record the cost of the returned inventory:
Inventory: Debit $250
Cost of Goods Sold: Credit $250
10. July 21 – Borrowed the amount owed on the July 8 purchase. Signed a note payable to the bank for $2,946, which takes into account the return of inventory on July 11.
To record the borrowing of funds, we need to record it as follows:
Notes Payable: Debit $2,946
Accounts Payable: Credit $2,946
11. July 23 – Received $6,860 cash in partial settlement of the account from the customer who purchased inventory on July 14. Granted the customer a 2% discount and credited his accounts receivable for $7,000.
Since this transaction involves a partial settlement and a discount, we need to record it as follows:
Cash: Debit $6,860
Sales Discount: Debit $140 (2% of $7,000)
Accounts Receivable: Credit $7,000
12. July 30 – Paid for the store supplies purchased on July 5.
Since this transaction involves the payment of a liability, we need to record it as follows:
Accounts Payable: Debit $600
Cash: Credit $600
These are the journal entries to be recorded on the books of Hawkeye Electric Company for each transaction.