Question

The following selected transactions were completed during August between Summit Company and Beartooth Co. Both companies use the net method under a perpetual inventory system. Aug. 1 Summit Company sold merchandise on account to Beartooth Co., $52,150, terms FOB destination, 2/15, n/eom. The cost of the goods sold was $25,940. 2 Summit Company paid freight of $1,235 for delivery of merchandise sold to Beartooth Co. on August 1. 5 Summit Company sold merchandise on account to Beartooth Co., $60,090, terms FOB shipping point, n/eom. The cost of the goods sold was $36,900. 9 Beartooth Co. paid freight of $2,140 on August 5 purchase from Summit Company. 15 Summit Company sold merchandise on account to Beartooth Co., $62,600, terms FOB shipping point, n/45. Summit paid freight of $1,515, which was added to the invoice. The cost of the goods sold was $32,600. 16 Beartooth Co. paid Summit Company for purchase of August 1. 20 Summit Company paid Beartooth Co. a cash refund of $1,000 for defective merchandise purchased on August 1. Beartooth Co. kept the merchandise. 31 Beartooth Co. paid Summit Company on account for purchase of August 5. 31 Summit Company issued Beartooth Co. a credit memo for merchandise with an invoice amount of $3,800 that was returned from the August 15 sale. The cost of the merchandise returned was $2,200. 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.

Answer 1

Solution :	Journal Entries
Books of Summit Company
Date	Account name	F.No.	Debit	Credit
Aug. 1	Beartooth Co.		52150
	To sales account			52150
	(goods sold on account for the term 2/15)
	Sales account		52150
	To cost of good sold			25940
	To gross profit			26210
	(amount transferred to respective accounts)
Aug. 2	Freight outward		1235
	To Cash			1235
	(freight paid for sale made to Beartooth co. on Aug. 1)
Aug. 5	Beartooth Co.		60090
	To sales account			60090
	(goods sold on account for the term n/eom)
	Sales account		60090
	To cost of good sold			36900
	To gross profit			23190
	(amount transferred to respective accounts)
Aug. 15	Beartooth Co.		62600
	To sales account			62600
	(goods sold on account for the term n/45)
	Sales account		62600
	To cost of good sold			32600
	To gross profit			30000
	(amount transferred to respective accounts)
	Freight outward		1515
	To Cash			1515
	(freight paid for sale made to Beartooth co. on Aug. 15)
	Beartooth Co.		1515
	To Freight inward			1515
	(freight paid and added to the invoice)
Aug. 16	Cash		51107
	Discount on sale of goods		1043
	To Beartooth co.			52150
	(payment receive and discount allowed on the term of 2/15)
Aug. 20	Beartooth Co.	1000
	To Cash		1000
	(amount paid for defective merchandise sold on Aug. 1)
Aug. 31	Cash	60090
	To Beartooth Co.		60090
	(amount received on sale made on Aug. 5)
Aug. 31	Sales account		3800
	To Beartooth Co.			3800
	(sales made on Aug. 15 returned recorded)
	Cost of good sold		2200
	Gross profit account		1600
	To sales account			3800
	(amount transferred to respective accounts)

Books of Beartooth co.
Date	Account name	F.No.	Debit	Credit
Aug. 1	Inventory		52150
	To Summit Co.			52150
	(being inventory purchased on term 2/15)
Aug. 5	Inventory		60090
	To Summit Co.			60090
	(being inventory purchased)
Aug. 9	Freight inward		2140
	To cash			2140
	(being freight paid)
Aug. 15	Inventory		62600
	To Summit Co.			62600
	(being inventory purchased)
	Freight inward		1515
	To Summit Co.			1515
	(being freight paid by supplier and added to the invoice)
Aug. 16	Summit Co.		52150
	To Discount on purchase of goods			1043
	To cash			51107
	(payment made with the term 2/15)
Aug. 20	Cash		1000
	To Summit Co.			1000
	(payment received for defective merchandise)
Aug. 31	Summit Co.		60090
	To cash			60090
	(amount paid for inventory purchase on Aug. 5)
Aug. 31	Sumit Co.		3800
	To Inventory			3800
	(purchase made on Aug. 5 recorded)