a) Spencer Sporting Goods company engaged in the following transactions in April 2012.
Apr. 1: Sold merchandise on account for USD 288,000; terms 2/10, n/30, FOB shipping point, freight collect.
Apr. 5: USD 43,200 of the goods sold on account on April 1 were returned for a full credit. Payment for these goods had not yet been received.
Apr. 8: A sales allowance of USD 5,760 was granted on the merchandise sold on April 1 because the merchandise was damaged in shipment.
Apr. 10: Payment was received for the net amount due from the sale of April 1.
b) High Stereo Company engaged in the following transactions in July 2010.
July 2: Purchased stereo merchandise on account at a cost of USD 43,200; terms 2/10, n/30, FOB destination, freight repaid.
July 15: Sold merchandise for USD 64,800, terms 2/10, n/30, FOB destination, freight prepaid.
July 16. Paid freight costs on the merchandise sol, USD 2,160. July 20: High Stereo company was granted an allowance of USD 2,880 on the purchase of July 2 because of damaged merchandise.
July 31: Paid the amount due on the purchase of July 2.
Prepare journal entries to record the transactions.
FOB stands for Free on Board. It is the term used in the context of shipping. It usually indicates that which party is liable for the goods which got damaged during the shipping. Parties involved are buyer and seller of the goods.
Answer and Explanation: 1
|Date||Particulars||Debit ($)||Credit ($)|
|a) Apr 1||Account receivable||288,000|
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fromChapter 6 / Lesson 2
Merchandise inventory refers to items that are acquired by a distributor for the purpose of resale to a third party. Learn more about items in merchandise inventories, goods in transit, and goods in consignment.