Question

In: Accounting

P5-3B Presented here are selected transactions for Shaoshi Inc. during October of the current year. Shaoshi...

P5-3B
Presented here are selected transactions for Shaoshi Inc. during October of the current year. Shaoshi uses a perpetual inventory system.

Oct.   1

Purchased merchandise on account from Micron Ltd. at a cost of $86,000, terms 1/15, n/30, FOB shipping point.

1

Freight charges of $1,400 were paid by the appropriate party on the October 1 purchase of merchandise.

2

Returned for credit $4,000 of damaged goods purchased from Micron on October 1.

6

Purchased supplies for $2,800 cash.

8

Sold the remaining merchandise purchased from Micron to Guidant Corp. for $140,000 on account, terms 2/10, n/30, FOB destination.

9

Freight charges of $2,300 were paid by the appropriate party on the October 8 sale of merchandise.

10

Purchased equipment on account for $62,000.

12

Guidant returned damaged merchandise that was purchased on October 8 for a $3,500 credit on account. The merchandise originally cost $2,185 and was not restored to inventory.

15

Purchased merchandise for $36,300 cash.

17

Received the balance owing from Guidant.

28

Sold merchandise for $30,000 on account to Deux Ltée, terms 2/10, n/30, FOB shipping point. The merchandise had a cost of $18,000.

29

Freight charges of $750 were paid by the appropriate party on the October 28 sale of merchandise.

30

Paid Micron the balance owing.

31

Deux returned some of the merchandise that was purchased on October 28 for a $5,000 credit on account. The merchandise originally cost $3,000 and was restored to inventory.

Instructions

(a) Record the October transactions.

(b) Assume that Shaoshi took advantage of the 1% purchase discount offered by Micron Ltd. and paid Micron on October 14 rather than October 30. Record the entry that Shaoshi would make on October 14 and determine the cost of missing this purchase discount to Shaoshi.

Record and post purchase and sales transactions; prepare trial balance.

Solutions

Expert Solution

(a)

Shaoshi Inc.
General journal for the month of October , current year
Date Account Title Debit Credit
Oct.1 Merchandise inventory 86000
Accounts payable 86000
(Purchase of merchandise on account from Micron)
Oct.1 Merchandise inventory 1400
Cash 1400
(Freight charges paid for the purchase dated Oct.1)
Oct.2 Accounts payable 4000
Merchandise inventory 4000
(Return of damaged goods to supplier)
Oct.6 Supplies 2800
Cash 2800
(Purchase of supplies for cash)
Oct.8 Accounts receivable 140000
Sales 140000
(Sale of goods received from Micron to Guidant Corp)
Cost of goods sold 83400
Merchandise inventory 83400
(Cost of goods sold to Guidant Corp.)
Oct.9 Freight outward 2300
Cash 2300
(Freight charges paid for the sale made to Guidant Corp.)
Oct.10 Equipment 62000
Accounts payable 62000
(Purchase of equipment on account)
Oct.12 Sales returns and allowances 3500
Accounts receivable 3500
(Sale value of goods returned by Guidant Corp.)
Since the goods are not taken into inventory no entry needed for cost
Oct.15 Merchandise inventory 36300
Cash 36300
(Merchandise purchased for cash)
Oct.17 Cash 133770
Sales discount 2730
Accounts receivable 146500
(Payment received from Guidant Corp.)
Oct.28 Accounts receivable 30000
Sales 30000
(Sale of merchandise to Deux Ltee on account)
Cost of goods sold 18000
Merchandise inventory 18000
(Cost of merchandise sold to Deux Ltee )
Oct.29 No entry required as the freight charges are paid by the buyer
Oct.30 Accounts payable 82000
Cash 82000
(Payment made to Micron)
Oct.31 Sales returns and allowances 5000
Accounts receivable 5000
(Credit for the goods received from Deux Ltee)
Merchandise inventory 3000
Cost of goods sold 3000
(Cost of the goods returned by Deux Ltee into inventory)

(b)

Date Account Title Debit Credit
Oct.14 Accounts payable 82000
Discount on purchase 820
Cash 81180
(Entry to record the payment made to Micron)
Shaoshi would have gained $820 if they had taken benefit of the discount
offered by Micron.
Shaoshi Inc.
Account Transactions Trial balance
Debit Credit Debit Credit
Cash 133770 124800 8970
Acounts Receivable 170000 145000 25000
Merchandise Inventory 126700 105400 21300
Supplies 2800 2800
Equipment 62000 62000
Accounts payable 86000 148000 62000
Sales 170000 170000
Sales returns and allowances 8500 8500
Cost of goods sold 101400 3000 98400
Freight outward 2300 2300
Sales discount 2730 2730
T O T A L 696200 696200 232000 232000

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