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The Marchetti Soup Company entered into the following transactions during the month of June:
(a) purchased inventory on account for $245,000 (assume Marchetti uses a perpetual inventory system);
(b) paid $60,000 in salaries to employees for work performed during the month;
(c) sold merchandise that cost $160,000 to credit customers for $300,000;
(d) collected $280,000 in cash from credit customers; and
(e) paid suppliers of inventory $225,000.
Prepare journal entries for each of the above transactions.

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Answer:

The Marchetti Soup Company

Journal Entries:

a) Debit Inventory $245,000

Credit Accounts Payable $245,000

To record the purchase of inventory on account.

b) Debit Salaries Expense $60,000

Credit Cash $60,000

To record the payment of salaries for the month.

c) Debit Accounts Receivable $300,000

Credit Sales Revenue $300,000

To record the sale of inventory on account

Debit Cost of Goods Sold $160,000

Credit Inventory $160,000

To record the cost of goods sold.

d) Debit Cash $280,000

Credit Accounts Receivable $280,000

To record the receipt of cash from customers.

e) Debit Accounts Payable $225,000

Credit Cash $225,000

To record the payment to suppliers on account.

Explanation:

Journal entries enable the identification of accounts involved in each transaction.  They are used to make the initial record into the accounting books before they are posted to the general ledger.  They show the accounts to be debited and the ones to be credited.

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