DS Unlimited has the following transactions during August. August 6
Purchases 50 handheld game devices on account from GameGirl, Inc., for $ 100 each, terms 1/10, n/60.
August 7
Pays $300 to Sure Shipping for freight charges associated with the August 6 purchase.
August 10
Returns to GameGirl five game devices that were defective.
August 14
Pays the full amount due to GameGirl.
August 23
Sells 30 game devices purchased on August 6 for $120 each to customers on account. The total cost of the 30 game devices sold is $3,170.
Required:
Record the transactions of DS Unlimited, assuming the company uses a perpetual inventory system.

See the journal entries below.

Explanation:

The journal entry will look as follows:

Date      Account and explanation                 Debit ($)         Credit ($)  

Aug 6     Inventory (50 * $100)                           5,000  

               Account payable                                                           5,000

              (To record inventory purchased on account.)                            

Aug 7      Inventory                                                 300

               Cash                                                                                  300

               (To record payment of freight charges associated with the August 6 purchase.)

Aug 10    Account payable (5 * $100)                   500

               Inventory                                                                           500

               (To record the returns of defective five game devices to GameGirl.)

Aug 14     Account payable (w.1)                        4,500

               Cash (balancing figure)                                                 4,455

                Inventory (w.2)                                                                   45

                (To record the payment of the full amount due to GameGirl.)   

Aug 23    Account receivable (30 * $120)         3,600  

               Sales revenue                                                              3,600

                Cost of goods sold                             3,170

                Inventory                                                                       3170

                (To record the Sales and cost of 30 game devices purchased on August 6.)

Workings:

w.1. Account payable = Purchases on account on August 6 - Defective inventory returned on August 10 = $5,000 - $500 = $4,500

w.2. Inventory = Discount received on account payable for paying within 10 days = w.1 * 1% = $4,500 * 1% =$45

a corporation is legally separate from its owner, and it pays its own taxes.