Question

A company engaged in the following transaction during October of 2019.

Record the events using the horizontal statement model provided below.

October 2 Purchased inventory from the Company costing $10,000 on account. The terms of the purchase were 1/10, n/30.
October 3 The merchandise was delivered FOB destination. Freight costs were $110.
October 5 Returned $1,000 of the inventory to the Company because it not what was ordered.
October 10 Paid the amount due to the company.
October 15 Sold inventory that had cost $5,000 for $10,000 on account to Kent, Corp, under terms 2/10, n/45.
October 16 Delivered goods FOB destination sold on October 15. Freight costs of $60 were paid in cash.
October 19 Received returned merchandise from Kent, Corp. The cost of the returned merchandise was $1,000 and was sold for $2,000.
October 25 Collected the amount due on the account receivable from Kent Corp.

Balance Sheet

Income statement

Assets

=

Liab.

+

stkholders' equity

Rev.

-

Exp.

Net Inc.

Date

Cash

+

A. Rec.

+

Mdse. Inv.

=

A. pay

+

C. stk.

+

ret. Earn

10/2

10/3

10/5

10/10

10/10

10/15

10/15

10/16

10/19

10/19

10/25

10/25

Answer 1

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A company
Date	Assets						Liabilities + Stockholder's Equity						Profit & Loss					Remarks
	Cash	+	Accounts Receivable	+	Mdse. Inv.	=	A. Pay	+	Common Stock	+	Retained Earnings		Revenue	-	Expense	=	Net Income
2-Oct					10,000.00		10,000.00											Purchased inventory from the Company costing $10,000 on account. It will increase inventory and accounts payable.
3-Oct	(110.00)														110.00		(110.00)	The merchandise was delivered FOB destination. For delivery no entry is required. Freight costs were $110. Freight cost is an expense. This will reduce cash balance too.
5-Oct					(1,000.00)		(1,000.00)											Returned $1,000 of the inventory to the Company. It will decrease inventory and accounts payable.
10-Oct	(8,910.00)						(9,000.00)											Amount due to the company is paid and discount received. See workings below.
10-Oct													90.00				90.00	Amount due to the company is paid and discount received. See workings below.
15-Oct			10,000.00										10,000.00				10,000.00	Sold inventory that had cost $5,000 for $10,000 on account.
15-Oct					(5,000.00)										5,000.00		(5,000.00)	Sold inventory that had cost $5,000 for $10,000 on account.
16-Oct	(60.00)														60.00		(60.00)	The merchandise was delivered FOB destination. For delivery no entry is required. Freight costs were $60. Freight cost is an expense. This will reduce cash balance too.
19-Oct			(2,000.00)										(2,000.00)				(2,000.00)	The cost of the returned merchandise was $1,000 and was sold for $2,000.
19-Oct					1,000.00										(1,000.00)		1,000.00	The cost of the returned merchandise was $1,000 and was sold for $2,000.
25-Oct	7,840.00		(8,000.00)															Collected the amount due on the account receivable. See workings below.
25-Oct															160.00		(160.00)	Collected the amount due on the account receivable. See workings below.
	(1,240.00)		-		5,000.00		-		-		-		8,090.00		4,330.00		3,760.00
Workings
Discount received:
2-Oct	Purchase		10,000.00
5-Oct	Returned		1,000.00
5-Oct	Net Payable		9,000.00		As it is paid within payment terms so discount is applicable at 1%.
10-Oct	Discount at 1%		90.00
10-Oct	Amount Paid		8,910.00
Discount allowed:
15-Oct	Sales		10,000.00
19-Oct	Returns		2,000.00
5-Oct	Net Receivable		8,000.00		As it is paid within payment terms so discount is applicable at 2%.
10-Oct	Discount at 2%		160.00
10-Oct	Amount Paid		7,840.00