Question

1. If the Ortiz Corporation purchases 100 washing machines from the Whirlpool Corporation FOB Shipping Point, who pays for the cost of shipping the machines from Whirlpool to Ortiz?

2. Rodriguez Company reported the following balances at November 30, 2019:

                                Gross Sales Revenue                                                 $16,000

                                Sales Returns and Allowances                                          600

                                Sales Discounts                                                                300

                                Cost of Goods Sold                                                        7,600

1. What are the net sales for the month?

2. What is the gross margin for the month?

3. Reid Supply sells backpacks and other school supplies. The company uses a perpetual inventory system. During June, the following transactions and events occurred:

June           4 Sold 70 backpacks at $25 each to Hunter Company, terms 2/10, n/30, F.O.B. Shipping Point.

June           6 Gave credit of $150 for the return of 6 backpacks purchased on Sept. 4 that were defective.

June 14 Received a check as payment in full from Hunter Company.

Instructions: Please write the journal entries for the June sales transactions for Reid Supply.

Answer 1

Answer 1 : Ortiz Corporation will incur all costs of shipping the machines from the shipping port where Whirlpool Corporation is located till it reaches the warehouse/factory of Ortiz Corporation. Whirlpool Corporation only needs to incur the costs of transporting the machines from its warehouse/factory till the shipping port.

Answer 2 :

a. Net Sales = Gross Sales Revenue - Sales return and allowances and discounts = 16,000-600-300 = $15,100

b. Gross margin for the month = Gross profit/Net sales = (15,100-7,600)/15,100 = 50% (rounded off)

Answer 3 : Journal Entries :

Date	General Journal	Debit	Credit
June 4	Accounts Receivable	1,750
	Sales		1,750
June 6	Sales Return and Allowances	150
	Accounts Receivable		150
June 14	Cash	1,568
	Sales Discount	32
	Accounts Receivable		1,600