Question

1. William purchased merchandise on account on April 5 for $4,488. On April 7, Brandon paid $44 of freight charges for the goods purchased on April 5. On April 8, William returned goods purchased on April 5 for $88. Include margin explanations for the changes in revenues and expenses.

Use a tabular summary to record these transactions. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

2. Prepare a tabular summary to record the following transactions on Wildhorse Company’s books using a perpetual inventory system. Include margin explanations for the changes in revenues and expenses.

a.		On September 3, Blossom Company sold $910,000 of merchandise to Wildhorse Company on account, terms 2/10, n/30. The cost of the merchandise sold was $559,000.
b.		On September 6, Wildhorse Company returned $117,000 of the merchandise purchased on March 2. The seller’s cost of the merchandise returned was $78,000.
c.		On September 13, Wildhorse Company paid the balance due to Blossom Company.

(Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

3. Concord Company buys merchandise on account from Riverbed Company for $520. Concord sells the goods to Ellis for $792 cash. Use a tabular summary to record the transactions for Concord Company using a perpetual inventory system. Include margin explanations for the changes in revenues and expenses. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Answer 1

Sol:

1.

Date	Particulars	Amount(Dr.)	Amount(Cr.)
April 5	Merchandise(Inventory) A/c	$4488
Accounts Payable A/c		$4488
(Being merchandise purchased)
April 7	Freight Charge A/c	$44
Brandon A/c		$44
(Being freight charges paid)
April 8	Accounts Payable A/c	$88
Merchandise(Inventory) A/c		$88
(Being goods purchased on April 5 returned)

2.

Date	Particulars	Amount(Dr.)	Amount(Cr.)
September 3	Accounts receivable A/c	$910,000
sales A/c		$910,000
(Being inventory sold at sale price)
Cost of goods sold A/c	$559,000
Merchandise inventory A/c		$559,000
(Being merchandise sold at cost price)
September 6	Sales return A/c	$117,000
Accounts receivable A/c		$117,000
(Being goods returned to us)
Merchandise inventory A/c	$78,000
Cost of goods sold A/c		$78,000
(Being sales return is recorded)
September 13	Cash A/c	$777,140
Discount Allowed A/c	$15,860
Accounts receivable A/c		$793,000
(Being balance cash received after allowing discount)

The computation of the balance due is shown below:

= Sales - Returned goods

= $910,000 - $117,000

= $793,000

Discount = $793,000 × 2% = $15,860

Cash = ($793,000 - 15,860) = $777,140

3.

Sr. No.	Particulars	Amount(Dr.)	Amount(Cr.)
1	Merchandise Inventory	$520
Riverbed Company		$520
(Being merchandise purchased from Riverbed Company)
2	Cash A/c	$792
Sales A/c		$792
(Being goods sold at cash to Ellish)