PART I—JOURNAL ENTRIES/COST OF GOODS SOLD
Charlie Brown, Inc. began 2007 with normal balances of $21,000 in inventory and $125 in petty cash, uses a
PERIODIC inventory system, accounts for depreciation on a straight-line basis, accounts for all purchases and
sales on the gross method, and computes Cost of Goods Sold and depreciation monthly.
During January 2007, the
company had the following transactions:
Paid $50,000 to purchase land and a warehouse .
The warehouse is expected to last 3 years, with no
The land has an estimated fair value of $36,000, and the warehouse has an estimated fair
value of $24,000.
Bought 1,500 units of inventory at $12 per unit from Linus, Inc. on terms 1/10, n/30, f.o.b. shipping
Received an invoice from Kanga transport for $65 of shipping costs on the January 4
invoice is due in 30 days.
Made a $24,000 sale on account to Heffalump Corporation on terms 1/5, n/20, f.o.b. destination.
Paid the amount due to Linus Corporation.
Received and paid an invoice from Roo transport for $30 of shipping costs on the January 8
Heffalump returned merchandise valued at $2,000 because the company no longer wanted the
Charlie Brown issued a credit memorandum for the appropriate amount.
merchandise was not defective, Heffalump was required to pay for the shipping costs on the return.
Recorded a cash sale of $6,200.
Jan. 24 Bought $7,900 of inventory on account from Schroeder Company on terms 2/10, n/30.
Jan. 27 Received the amount due from Heffalump.
31 Noted that the petty cash box contained cash of $11 and vouchers for $41 for postage stamps and $72 for
All of the postage stamps and office supplies were used during the month. The company
replenished the petty cash box.