Question

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.

Answer 1

(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