1) Perpetual inventory/contract based approach (7 marks)
On Feb 1, Zoomies Ltd. sold merchandise on account to Tortoise Inc. for $56,000, net 30. Zoomies acquired this
merchandise inventory at a cost of $37,500. Zoomies has a stated return policy of 10 days from the date of sale and
estimates that returns will be 5% of sales. On Feb 10, Tortoise returned merchandise with a sales price of $2,800 and a
cost of $ 875. The goods were returned to inventory. On Feb 28, Zoomies received payment from Tortoise for the
balance due.
Instructions
Prepare journal entries to record the transactions for Zoomies under a perpetual inventory system using the contract-
based approach. (round all amounts to the nearest dollar).