Question
In: Accounting
Aug. 1 Purchased merchandise from Aron Company for $7,500 under credit terms of 1/10, n/30, FOB...
Aug. 1 Purchased merchandise from Aron Company for $7,500 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1. Aug. 5 Sold merchandise to Baird Corp. for $5,200 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $4,000. Aug. 8 Purchased merchandise from Waters Corporation for $5,400 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. Aug. 9 Paid $125 cash for shipping charges related to the August 5 sale to Baird Corp. Aug. 10 Baird returned merchandise from the August 5 sale that had cost Lowe’s $400 and was sold for $600. The merchandise was restored to inventory. Aug. 12 After negotiations with Waters Corporation concerning problems with the purchases on August 8, Lowe’s received a credit memorandum from Waters granting a price reduction of $400 off the $5,400 of goods purchased. Aug. 14 At Aron’s request, Lowe’s paid $200 cash for freight charges on the August 1 purchase, reducing the amount owed to Aron. Aug. 15 Received balance due from Baird Corp. for the August 5 sale less the return on August 10. Aug. 18 Paid the amount due Waters Corporation for the August 8 purchase less the price allowance from August 12. Aug. 19 Sold merchandise to Tux Co. for $4,800 under credit terms of n/10, FOB shipping point, invoice dated August 19. The merchandise had cost $2,400. Aug. 22 Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Lowe’s sent Tux a $500 credit memorandum toward the $4,800 invoice to resolve the issue. Aug. 29 Received Tux’s cash payment for the amount due from the August 19 sale less the price allowance from August 22. Aug. 30 Paid Aron Company the amount due from the August 1 purchase. Prepare a multiple-step income statement
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Expert Solution
Ans- Preparing a multiple-step income statement:
| Date | Particulars | Impact on income | Increase /(Decrease) to income |
| Aug.1 | Purchased merchandise from Aron company for $7,500 under the credit terms of 1/10,n/30 FOB destination, invoice dated August 1 | No Impact | $0 |
| Aug.5 | Sold merchandise to Baird Corp. for $5,200 under credit terms of 2/10.n/60, FOB destination,invoice dated August 5 | Increase | $5,200 |
| Aug.5 | The merchandise sold to Baird corp.cost $4,000 | Decrease | -$4,000 |
| Aug.8 | Purchased merchandise from waters corporation for $5,400 under credit terms of 1/10.n/45, FOB destination ,invoice dated August 8 | No impact | $0 |
| Aug.9 | Paid $125 cash for shipping charges related to august 5 sale to Baird Corp. | Decrease | -$125 |
| Aug.10 | Baird returned merchandise from the August 5 sale that had sold for $600 | Decrease | -$600 |
| Aug.10 | The cost of the merchandise returned by Lowe's was $400. The merchandise was restored to inventory | Increase | $400 |
| Aug.12 | After negotiation with Waters Corporation concerning problems with the purchases on Aug 8, Lowe's received a credit memorandum from Waters granting a price reduction of $400 off the 5,400 of goods purchased. | Increase | $400 |
| Aug.14 | At Aron's request,Lowe's paid $200 cash for freight charges on Aug.1 purchase,reducing the amount owes to Aron. | No Impact | $0 |
| Aug.15 | Received balance due from Baird Corp.for the Aug.5sale less the return on Aug.10 | No Impact | $0 |
| Aug.18 | Paid the amount due Waters Corporation for the Aug.8 purchase less the price allowance from Aug.12 | No Impact | $0 |
| Aug.19 | The cost of the merchandise sold to Tux was $2,400 ($4,800-$2,400) | Increase | $2,400 |
| Aug.22 | Tux requested a price reduction on the Aug.19 sale because the merchandise did not meet specification. Lowe's sent Tux a $500 credit memorandum towards the $4,800 invoice to resolve issue. | Decrease | -$500 |
| Aug.29 | Received Tux's cash payment for the amount due from the Aug.19 sale less the price allowance from Aug.22 | No Impact | $0 |
| Aug.30 | Paid Aron Company the amount due from the Aug.1 purchase | No Impact | $0 |
| Total Income |
$3,175 |
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