PART I—JOURNAL ENTRIES/COST OF GOODS SOLD/MERCHANDISING CLOSING ENTRIES
Nevada, Inc. uses a PERIODIC inventory system, accounts for all purchases and sales on the gross
method, and computes Cost of Goods Sold monthly.
The company’s December 31, 2005 balance sheet
showed an inventory balance of $47,200.
During January 2006, the company had the following
Sold merchandise to Iowa, Inc. on account for $14,400, on terms 2/10, n/30, f.o.b. destination.
Established a $75 petty cash fund.
Received and paid a $60 invoice from South Dakota Shipping for transportation costs on the
merchandise sold on January 3
10 Bought $36,500 of inventory on account from Kansas Corporation on terms 1/10, n/30, f.o.b.
11 Received the amount due from Iowa.
12 Received a $95 invoice from Tennessee Transportation for the freight charges on the inventory
bought on January 10
The bill is due on February 9
13 Returned $1,000 of the merchandise bought on January 8th to Kansas because it was defective,
and received a debit memorandum for that amount.
Because the goods were defective, Kansas
paid the shipping charges on the returned merchandise.
17 Sold $31,700 of inventory to Georgia, Inc. on terms 1/5, n/30, f.o.b. shipping point.
18 Paid the amount owed to Kansas Corporation.
23 Bought $16,300 of merchandise for cash from New Jersey Corporation.
29 Noted that the petty cash box had $6.00 of cash remaining, and vouchers of $19.00 for office
supplies that had been used during the month,
$14.00 for a reimbursement to an employee for
long distance phone charges relating to business calls the employee had made at a sales
conference, and $38.00 for flowers that the company had sent to a customer who was celebrating
Replenished the petty cash fund and recorded the necessary journal entry.
In addition, at January 31