Sundance Systems has the following transactions during July. July 5 Purchases 56 LCD televisions on account from Red River Supplies for $3,300 each, terms 3/10, n/30. July 8 Returns to Red River two televisions that had defective sound. July 13 Pays the full amount due to Red River. July 28 Sells remaining 54 televisions from July 5 for $3,800 each on account.

Required:
Record the transactions of Sundance Systems, assuming the company uses a perpetual inventory system.

July 5

LCD televisions $184,800 (debit)

Trade Payable :  Red River Supplies $184,800 (credit)

July 8

Trade Payable :  Red River Supplies $6,600 (debit)

LCD televisions $6,600 (credit)

July 13

J1

Trade Payable :  Red River Supplies $5,346 (debit)

Discount Received $5,346 (credit)

J2

Trade Payable :  Red River Supplies $172,854 (debit)

Cash $172,854 (credit)

July 28

J1

Cost of Goods Sold $172,854 (debit)

LCD televisions $172,854 (credit)

J2

Trade Receivable $205,200 (debit)

Revenue $205,200 (credit)

Explanation:

July 5

Recognize Televisions Inventory and Recognize a Liability Account Payable

July 8

De-recognize the Liability and the Inventories to the extend to the amount of televisions returned to supplier

July 13

J1

Recognize the discount received from Supplier for prompt settlement of account within the credit terms of 3/10, n/30. (Account was settled within 10 days)

J2

De-recognize the liability on settlement of the Account

July 28

J1

Recognize cost of goods sold on the sale since the entity uses perpetual inventory method.

J2

Recognize an Asset - Trade Receivable and Revenue from Sale of the Televisions.

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