Klondike Music Sells Musical Instruments

question 109

Essay

Klondike Music sells musical instruments. The following data relates to Klondike's inventory of guitars. On January 1, 2014, Klondike had 12 guitars in inventory at a cost of $250 each. During January, the following transactions occurred:
Jan. 1 Purchased 15 guitars at $250 each from International Music Centre (IMC) on account, terms n/30
4 Sold 2 guitars for cash at $370 each.
6 One of the two guitars sold on Jan 4 was returned because it was defective. A full refund was paid. The guitar will be returned to IMC on January 7.
7 The defective guitar was returned to IMC for a credit on account.
16 Sold 21 guitars at $300 on account, terms 2/10, n/30.
18 Purchased 10 guitars from IMC for $250 each on account, terms n/30.
25 Paid the full amount owing to IMC.
26 Collected the balance owing from the Jan 16 sale.
Instructions
Using the perpetual inventory system, prepare the journal entries to record Klondike Music's transactions.

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Definitions:

Firm

A business enterprise or establishment engaged in commercial, industrial, or professional activities.

Normal Good

A type of good for which demand increases when consumer income rises, and falls when consumer income decreases.

Demand Shift

A change in the quantity demanded at every price point, often caused by factors like consumer preferences, income, and price of related goods.

Quantity Demanded

The cumulative quantity of a product or service that buyers are ready and capable of buying at a specific price.