Question

The following selected transactions were completed during August between Summit Company and Beartooth Co. Both companies use the net method under a perpetual inventory system.

Aug.	1	Summit Company sold merchandise on account to Beartooth Co., $48,000, terms FOB destination, 2/15, n/eom. The cost of the goods sold was $28,800.
	2	Summit Company paid freight of $1,150 for delivery of merchandise sold to Beartooth Co. on August 1.
	5	Summit Company sold merchandise on account to Beartooth Co., $66,000, terms FOB shipping point, n/eom. The cost of the goods sold was $40,000.
	9	Beartooth Co. paid freight of $2,300 on August 5 purchase from Summit Company.
	15	Summit Company sold merchandise on account to Beartooth Co., $58,700, terms FOB shipping point, n/45. Summit paid freight of $1,675, which was added to the invoice. The cost of the goods sold was $35,000.
	16	Beartooth Co. paid Summit Company for purchase of August 1.
	20	Summit Company paid Beartooth Co. a cash refund of $1,000 for defective merchandise purchased on August 1. Beartooth Co. kept the merchandise.
	31	Beartooth Co. paid Summit Company on account for purchase of August 5.
	31	Summit Company issued Beartooth Co. a credit memo for merchandise with an invoice amount of $4,000 that was returned from the August 15 sale. The cost of the merchandise returned was $2,500.

Journalize the August transactions for (1) Summit Company and (2) Beartooth Co. Refer to the Chart of Accounts of the appropriate company for exact wording of account titles.

Answer 1

In the books of Summit:

Date	Account title and Explanation	Debit	Credit
Aug.1	Accounts receivable-Beartooth Co.	$48,000
	Sales revenue		$48,000
	[To record credit sales]
	Cost of goods sold	$28,800
	Inventory		$28,800
	[To record cost of goods sold]
Aug.2	Delivery expense	$1,150
	Cash		$1,150
	[To record payment of freight]
Aug.5	Accounts receivable-Beartooth Co.	$66,000
	Sales revenue		$66,000
	[To record credit sales]
	Cost of goods sold	$40,000
	Inventory		$40,000
	[To record cost of goods sold]
Aug.9	No entry
Aug.15	Accounts receivable-Beartooth Co. [58700+1675] freight]	$60,375
	Sales revenue		$58,700
	Cash		$1,675
	[To record credit sales and payment of freight on behalf of Beartooth]]
	Cost of goods sold	$35,000
	Inventory		$35,000
	[To record cost of goods sold]
Aug.16	Cash	$47,040
	Sales discount [48000 x 2%]	$960
	Accounts receivable-Beartooth Co.		$48,000
	[To record collections from customers]
Aug.20	Sales returns and allowance	$1,000
	Cash		$1,000
	[To record refund given for defective merchandise]
Aug.31	Cash	$66,000
	Accounts receivable-Beartooth Co.		$66,000
	[To record collections from customers]
Aug.31	Sales returns and allowance	$4,000
	Accounts receivable-Beartooth Co.		$4,000
	[To record sales returns]
	Inventory	$2,500
	Cost of goods sold		$2,500
	[To record cost of sales returns]

In the books of Beartooth:

Date	Account title and Explanation	Debit	Credit
Aug.1	Inventory	$48,000
	Accounts payable-Summit Co.		$48,000
	[To record purchase of inventory on account]
Aug.2	No Entry
Aug.5	Inventory	$66,000
	Accounts payable-Summit Co.		$66,000
	[To record purchase of inventory on account]
Aug.9	Inventory	$2,300
	Cash		$2,300
	[To record payment of freight]
Aug.15	Inventory [58700+1675 freight]	$60,375
	Accounts payable-Summit Co.		$60,375
	[To record purchase of inventory on account]
Aug.16	Accounts payable-Summit Co.	$48,000
	Inventory [48000 x 2%]		$960
	Cash		$47,040
	[To record cash paid for accounts payable]
Aug.20	Cash	$1,000
	Inventory		$1,000
	[To record receipt of refund for defective goods]
Aug.31	Accounts payable-Summit Co.	$66,000
	Cash		$66,000
	[To record cash paid for accounts payable]
Aug.31	Accounts payable-Summit Co.	$4,000
	Inventory		$4,000
	[To record purchase returns]