Page 269 - Accounting Principles (A Business Perspective)

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Merchandise
Inventory 120
Sales S40
Sales Discounts 18
Sales Returns
and Allowances 45
Purchases 600
Purchase
Discounts 12
Purchase Returns
and Allowances 24
Transportation-In 36

Exercise L Using the data in the previous exercise prepare closing entries for the preceding accounts. Do not
close the Income Summary account.

Problems
Problem A a. Spencer Sporting Goods Company engaged in the following transactions in April 2010
Apr. 1 Sold merchandise on account for USD 288,000; terms 2/10, n/30, FOB shipping point, freight collect.
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.
8 A sales allowance of USD 5,760 was granted on the merchandise sold on April 1 because the merchandise was
damaged in shipment.

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 prepaid.
15 Sold merchandise for USD 64,800, terms 2/10, n/30, FOB destination, freight prepaid.
16 Paid freight costs on the merchandise sold, USD 2,160.
20 High Stereo Company was granted an allowance of USD 2,880 on the purchase of July 2 because of damaged

merchandise.
31 Paid the amount due on the purchase of July 2.
Prepare journal entries to record the transactions.
Problem B Mars Musical Instrument Company and Tiger Company engaged in the following transactions with
each other during July 2010:
July 2 Mars Musical Instrument Company purchased merchandise on account with a list price of USD 48,000
from Tiger Company. The terms were 3/EOM, n/60, FOB shipping point, freight collect. Trade discounts of 15 per
cent, 10 per cent, and 5 per cent were granted by Tiger Company.
5 The buyer paid the freight bill on the purchase of July 2, USD 1,104.

6 The buyer returned damaged merchandise with an invoice price of USD 2,790 to the seller and received full
credit.
On the last day of the discount period, the buyer paid the seller for the merchandise.
Prepare all the necessary journal entries for the buyer and the seller.

Accounting Principles: A Business Perspective 270 A Global Text