Question

Sales-related and purchase-related transactions for seller and buyer using perpetual inventory system

The following selected transactions were completed during August between Summit Company and Beartooth Co.:

Aug.	1	Summit Company sold merchandise on account to Beartooth Co., $48,000, terms FOB destination, 2/15, n/eom. The cost of the goods sold was $28,800.
	2	Summit Company paid freight of $1,150 for delivery of merchandise sold to Beartooth Co. on August 1.
	5	Summit Company sold merchandise on account to Beartooth Co., $66,000, terms FOB shipping point, n/eom. The cost of the goods sold was $40,000.
	9	Beartooth Co. paid freight of $2,300 on August 5 purchase from Summit Company.
	15	Summit Company sold merchandise on account to Beartooth Co., $58,700, terms FOB shipping point, 1/10, n/30. Summit Company paid freight of $1,675, which was added to the invoice. The cost of the goods sold was $35,000.
	16	Beartooth Co. paid Summit Company for purchase of August 1.
	25	Beartooth Co. paid Summit Company on account for purchase of August 15.
	31	Beartooth Co. paid Summit Company on account for purchase of August 5.

Journalize the August transactions for (1) Summit Company and (2) Beartooth Co. Refer to the Chart of Accounts of the appropriate company for exact wording of account titles.

CHART OF ACCOUNTS
Summit Company
General Ledger
ASSETS 110 Cash 121 Accounts Receivable-Beartooth Co. 125 Notes Receivable 130 Inventory 131 Estimated Returns Inventory 140 Office Supplies 141 Store Supplies 142 Prepaid Insurance 180 Land 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 216 Salaries Payable 218 Sales Tax Payable 219 Customer Refunds Payable 221 Notes Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends 313 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Goods Sold 521 Delivery Expense 522 Advertising Expense 524 Depreciation Expense-Store Equipment 525 Depreciation Expense-Office Equipment 526 Salaries Expense 531 Rent Expense 533 Insurance Expense 534 Store Supplies Expense 535 Office Supplies Expense 536 Credit Card Expense 539 Miscellaneous Expense 710 Interest Expense

CHART OF ACCOUNTS
Beartooth Co.
General Ledger
ASSETS 110 Cash 120 Accounts Receivable 125 Notes Receivable 130 Inventory 131 Estimated Returns Inventory 140 Office Supplies 141 Store Supplies 142 Prepaid Insurance 180 Land 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 211 Accounts Payable-Summit Company 216 Salaries Payable 218 Sales Tax Payable 219 Customer Refunds Payable 221 Notes Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends 313 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Goods Sold 521 Delivery Expense 522 Advertising Expense 524 Depreciation Expense-Store Equipment 525 Depreciation Expense-Office Equipment 526 Salaries Expense 531 Rent Expense 533 Insurance Expense 534 Store Supplies Expense 535 Office Supplies Expense 536 Credit Card Expense 539 Miscellaneous Expense 710 Interest Expense

Answer 1

Requirement 1: [Summit-seller]

Date	Account title and Explanation	Debit	Credit
Aug.1	Accounts receivable-Beartooth Co.	$48,000
	Sales revenue		$48,000
	[To record credit sales]
	Cost of goods sold	$28,800
	Inventory		$28,800
	[To record cost of goods sold]
Aug.2	Delivery expense	$1,150
	Cash		$1,150
	[To record payment of freight]
Aug.5	Accounts receivable-Beartooth Co.	$66,000
	Sales revenue		$66,000
	[To record credit sales]
	Cost of goods sold	$40,000
	Inventory		$40,000
	[To record cost of goods sold]
Aug.9	No entry
Aug.15	Accounts receivable-Beartooth Co. [$58,700+$1,675 freight]	$60,375
	Sales revenue		$58,700
	Cash		$1,675
	[To record credit sales and payment of freight on behalf of Beartooth]]
	Cost of goods sold	$35,000
	Inventory		$35,000
	[To record cost of goods sold]
Aug.16	Cash	$47,040
	Sales discount [48000 x 2%]	$960
	Accounts receivable-Beartooth Co.		$48,000
	[To record collcections from customers]
Aug.25	Cash	$59,788
	Sales discount [58,700 x 1%]	$587
	Accounts receivable-Beartooth Co.		$60,375
	[To record collections from customers]
Aug.31	Cash	$66,000
	Accounts receivable-Beartooth Co.		$66,000
	[To record cash collected from customers]

Requirement 2: [Beartooth-Buyer]

Date	Account title and Explanation	Debit	Credit
Aug.1	Inventory	$48,000
	Accounts payable-Summit Co.		$48,000
	[To record purcahse of inventory on account]
Aug.2	No Entry
Aug.5	Inventory	$66,000
	Accounts payable-Summit Co.		$66,000
	[To record purcahse of inventory on account]
Aug.9	Inventory	$2,300
	Cash		$2,300
	[To record payment of freight]
Aug.15	Inventory [58700+1675]	$60,375
	Accounts payable-Summit Co.		$60,375
	[To record purchase of inventory on account]
Aug.16	Accounts payable-Summit Co.	$48,000
	Inventory [$48,000 x 2%]		$960
	Cash		$47,040
	[To record cash paid for accounts payable]
Aug.25	Accounts payable-Summit Co. [58700+1675]	$60,375
	Inventory [58700 x 1%]		$587
	Cash		$59,788
	[To record cash paid for accounts payable]
Aug.31	Accounts payable-Summit Co.	$66,000
	Cash		$66,000
	[To record cash paid for accounts payable]