Question

Problem 5-3A

Presented below are selected transactions for Sarasota Company during September and October of the current year. Sarasota uses a perpetual inventory system.

Sept. 1		Purchased merchandise on account from Hillary Company at a cost of $48,000, FOB destination, terms 1/15, n/30.
2		The correct company paid $2,000 of freight charges to Trucking Company on the September 1 merchandise purchase.
5		Returned for credit $3,300 of damaged goods purchased from Hillary Company on September 1.
15		Sold the remaining merchandise purchased from Hillary Company to Irvine Company for $70,000, terms 2/10, n/30, FOB destination.
16		The correct company paid $2,200 of freight charges on the September 15 sale of merchandise.
17		Issued Irvine Company a credit of $6,000 for returned goods. These goods had cost Sarasota Company $3,300 and were returned to inventory.
25		Received the balance owing from Irvine Company for the September 15 sale.
30		Paid Hillary Company the balance owing for the September 1 purchase.
Oct. 1		Purchased merchandise on account from Kimmel Company at a cost of $55,000, terms 2/10, n/30, FOB shipping point.
2		The correct company paid freight costs of $1,100 on the October 1 purchase.
3		Obtained a purchase allowance of $2,600 from Kimmel Company to compensate for some minor damage to goods purchased on October 1.
10		Paid Kimmel Company the amount owing on the October 1 purchase.
11		Sold all of the merchandise purchased from Kimmel Company to Kieso Company for $80,000, terms 2/10, n/30, FOB shipping point.
12		The correct company paid $800 freight costs on the October 11 sale.
17		Issued Kieso Company a sales allowance of $1,500 because some of the goods did not meet Kieso's exact specifications.
31		Received a cheque from Kieso Company for the balance owing on the October 11 sale.

Answer 1

Date	Account Titles	Debit	Credit
Sep-01	Inventory	$            48,000
	Accounts Payable		$          48,000
Sep-02	no entry
Sep-05	Accounts Payable	$               3,300
	Inventory		$            3,300
Sep-15	Accounts Receivable	$            70,000
	Sales Revenue		$          70,000
	Cost of Goods Sold	$            44,700		=48000-3300
	Inventory		$          44,700
Sep-16	Delivery Expense	$               2,200
	Cash		$            2,200
Sep-17	Sales returns and allowances	$               6,000
	Accounts Receivable		$            6,000
	Inventory	$               3,300
	Cost of Goods Sold		$            3,300
Sep-25	Cash	$            62,720		=64000-1280
	Sales Discount	$               1,280		=64000*2%
	Accounts Receivable		$          64,000
Sep-30	Accounts Payable	$            44,700		=48000-3300
	Cash		$          44,700
Oct-01	Inventory	$            55,000
	Accounts Payable		$          55,000
Oct-02	Inventory	$               1,100
	Cash		$            1,100
Oct-03	Accounts Payable	$               2,600
	Inventory		$            2,600
Oct-10	Accounts Payable	$            52,400		=55000-2600
	Cash		$          51,352	=52400-1048
	Inventory		$            1,048	=52400*2%
Oct-11	Accounts Receivable	$            80,000
	Sales Revenue		$          80,000
	Cost of Goods Sold	$            52,452		=55000+1100-2600-1048
	Inventory		$          52,452
Oct-12	no entry
Oct-17	Sales Returns and allowances	$               1,500
	Accounts Receivable		$            1,500
Oct-31	Cash	$            78,500		=80000-1500
	Accounts Receivable		$          78,500