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Stringer Company, Seal Company, Barkley Company

Journal entry, correcting entry, and computation

Journal entries
Prepare the necessary general journal entries for the month of October for Stringer Company for each situation given below. Stringer uses a perpetual inventory system.

Oct. 5 Paid operating expenses as follows: $4,000 Salaries Expense, $2,000 Rent Expense, $500 Utilities Expense.
Oct. 8 Purchased merchandise for $25,000 on account. Credit terms: 2/10, n/30.
Oct. 12 Borrowed $25,000 from Sun Bank signing an 8%, 6-month note.
Oct. 15 Returned defective merchandise with a cost of $3,500 and paid balance due for merchandise purchased on October 8. The company takes all discounts to which it is entitled.
Oct. 20 Sold merchandise for $20,000 to Adder Company on account. The cost of the merchandise sold was $12,000. Credit terms: 2/10, n/30.
Oct. 22 Purchased a 2-year insurance policy for $4,400 cash.
Oct. 25 Issued Credit Memo No. 3811 to Adder Company for $2,000 for merchandise returned by Adder from the sale on October 20. The cost of the merchandise returned was $1,025.
Oct. 29 Purchased office equipment for $15,000 paying $4,000 in cash and signing a 3-month, 11% note for the remainder.

Correcting entries

The following errors were made in journalizing and posting transactions in March in the Seal Company.

1. A $1,700 payment for a cash purchase of a 2-year insurance policy was debited to Prepaid Insurance and credited to Accounts Payable.
2. A collection of $4,500 on account from a customer was recorded as a debit to Cash $4,500 and a credit to Sales Revenue $4,500.
3. A bill for $1,550 for new office equipment was debited to Office Supplies $1,550 and credited to Accounts Payable $550.
4. The receipt of $800 from a customer for future service was recorded as a debit to Accounts Receivable $800 and a credit to Service Revenue $800.

Instructions
Prepare the correcting entries at May 31 assuming the incorrect entry is not reversed. (Omit explanations.)

Computation of net purchases/cost of goods sold

Barkley Company uses a periodic inventory system and has the following account balances: Beginning Inventory $50,000, Ending Inventory $70,000, Freight-in $12,000, Purchases $450,000, Purchase Returns and Allowances $8,000, and Purchase Discounts $6,000.

Instructions
Compute each of the following:
(a) Net purchases
(b) Cost of goods available for sale
(c) Cost of goods sold

Attachments

Solution Preview

Journal entries
Prepare the necessary general journal entries for the month of October for Stringer Company for each situation given below. Stringer uses a perpetual inventory system.

Oct. 5 Paid operating expenses as follows: $4,000 Salaries Expense, $2,000 Rent Expense, $500 Utilities Expense.

Oct. 5 Salaries Expense 4,000
Rent Expense 2,000
Utilities Expense 500
Cash 6,500

Oct. 8 Purchased merchandise for $25,000 on account. Credit terms: 2/10, n/30.

Oct. 8 Merchandise Inventory 25,000
Accounts Payable 25,000

Oct. 12 Borrowed $25,000 from Sun Bank signing an 8%, 6-month note.

Oct. 12 Cash 25,000
Notes Payable 25,000

Oct. 15 Returned defective merchandise with a cost of $3,500 and paid balance due for merchandise purchased on October 8. The company takes all discounts to which it is entitled.

Oct. 15 Accounts Payable 25,000
Purchase returns and ...

Solution Summary

This solution is comprised of a detailed explanation to Prepare the necessary general journal entries for the month of October for Stringer Company for each situation given below, Prepare the correcting entries at May 31 assuming the incorrect entry is not reversed for Seal Company, and compute net purchases, cost of goods available for sale, cost of goods sold for Barkley Company.

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