Question

The following transactions occurred in April and May. Both companies use a perpetual inventory system.

Apr. 5		Blossom Company purchased merchandise from DeVito Company for $12,600, terms 2/10, n/30, FOB shipping point. DeVito had paid $7,600 for the merchandise.
6		The correct company paid freight costs of $250.
8		Blossom Company returned damaged merchandise to DeVito Company and was given a purchase allowance of $1,700. DeVito determined the merchandise could not be repaired and sent it to the recyclers. The merchandise had cost DeVito $1,025.
May.4 Prepare the journal entries for blossom.		Blossom paid the amount due to DeVito Company in full.
Date		Account Titles and Explanation	Debit	Credit
Apr. 5Apr. 6Apr. 8May 4
		(Purchase on account.)
Apr. 5Apr. 6Apr. 8May 4
		(To record cash payment of freight.)
Apr. 5Apr. 6Apr. 8May 4
		(To record purchase return.)
Apr. 5Apr. 6Apr. 8May 4
		(Payment on account.)

Prepare the journal entries to record the above transactions for DeVito Company. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

Date	Account Titles and Explanation	Debit	Credit
Apr. 5Apr. 6Apr. 8May 4
	(To record sales on account.)
Apr. 5Apr. 6Apr. 8May 4
	(To record cost of goods sold.)
Apr. 5Apr. 6Apr. 8May 4
Apr. 5Apr. 6Apr. 8May 4
	(To record credit for goods returned.)
Apr. 5Apr. 6Apr. 8May 4
	(Collection on account.)

Calculate the gross profit earned by DeVito on these transactions.

Gross profit

$

Answer 1

In books of Blossom company :

Date	Account title	Debit	credit
Apr 5	Merchandise inventory	12600
	Accounts payable		12600
Apr 6	Merchandise inventory	250
	cash		250
Apr 8	Accounts payable	1700
	Merchandise inventory		1700
May 4	Accounts payable (12600-1700)	10900
	cash		10900

#Since the amount is paid after discount period of 10 days (2/10) ,No discount is available .

In Books of DeVIto company :

Date	Account title	Debit	credit
Apr 5 `	Accounts receivable	12600
	sales revenue		12600
Apr 5	cost of goods sold	7600
	Merchandise inventory		7600
Apr 8	sales return and allowance	1700
	Accounts receivable		1700
May 4	cash	10900
	Accounts receivable		10900

Gross Profit = Net sales -cost of goods sold

         = [12600-1700]- 7600

        = 10900-7600

        = 3300

#Net sales = sales -sales return and allowance.