Question

Sales-Related and Purchase-Related Transactions for Seller and Buyer Using Perpetual Inventory System

The following selected transactions were completed during April between Swan Company and Bird Company:

Apr.2.	Swan Company sold merchandise on account to Bird Company, $18,400, terms FOB shipping point, 1/10, n/30. Swan Company paid freight of $400, which was added to the invoice. The cost of the merchandise sold was $11,600.
8.	Swan Company sold merchandise on account to Bird Company, $23,000, terms FOB destination, 2/15, n/30. The cost of the merchandise sold was $13,800.
8.	Swan Company paid freight of $730 for delivery of merchandise sold to Bird Company on April 8.
12.	Bird Company paid Swan Company for purchase of April 2.
18.	Swan Company paid Bird Company a refund of $2,000 for defective merchandise in the April 2 purchase. Bird Company agreed to keep the merchandise.
23.	Bird Company paid Swan Company for purchase of April 8.
24.	Swan Company sold merchandise on account to Bird Company, $9,400, terms FOB shipping point, n/45. The cost of the merchandise sold was $5,600.
26.	Bird Company paid freight of $330 on April 24 purchase from Swan Company.
30.	Swan Company granted a customer allowance (credit memo) to Bird Company for $11,300 for merchandise that was returned from the August 24 purchase. The cost of the merchandise returned was $6,500.

Required:

1. Journalize the April transactions for Bird Company (the buyer).

2. Journalize the April transactions for Swan Company (the seller).

Answer 1

Important Note -

FOB destination - In this kind of sale, the seller assumes the all the responsbility for freight etc and risk till the time the goods reaches the destination.

FOB Shipping - In this kind of sale, the responsibility of the seller is till the shipping point. Any expense or risk post that is borne by Buyer.

Journal - Swan Co

Date	Accounts Title	Debit ($)	Credit ($)
2-April	Bird Co	18,400
	To Sales		18,000
	To Cash		400
	(Freight paid on behalf of Bird Co for FOB shipping point sale hence not charges of as expense)
2 Apr	Cost of Goods Sold	11,600
	To Inventory (Cogs Accounted for)		11,600
8-Apr	Bird Co	23,000
	To Sales		23,000
	(FOB destination sale to Bird co.)
8 April	Cost of Goods Sold	13,800
	To Inventory		13,800
8 April	Freight Outwards	730
	To Cash		730
	(Since it is FOB destination sale hence freight charges are Seller's responsibility)
12 April	Cash	18,400
	To Bird Co		18,400
	(Cash received from Bird Co)
18 April	Sales Return & Allowance	2,000
	To Bird Co		2,000
	(Sales allowance accounted for, no impact on COGS since material not returned)
18 April	Bird Co	2,000
	To Cash		2,000
	(Refund paid for defective material to Bird Co)
23 April	Cash	23,000
	To Bird Co		23,000
	(Cash received from Bird Co)
24 April	Bird CO	9400
	To Sales		9,400
	(Sales made to Bird on FOB shipping point)
24 April	Cost of Goods Sold	5,600
	To Inventory		5,600
30 April	Sales Return & Allowance	11,300
	To Bird Co		11,300
	(Credit Memo issued for Sales return)
30 April	Inventory	5,600
	To Cost of Goods Sold		5,600
	(Sales return accounted for in COGS)
Date	Journal Bird CO Accounts Title	Debit ($)	Credit ($)
2 April	Purchases	18,000
	Freight Inwards	400
	To Swan Co		18,400
	(Freight and Purchase on FOB shipping accounted for)
8 April	Purchases	23,000
	To Swan Co		23,000
12 April	Swan Co	18,400
	To Cash		18,400
	(Cash paid to Swan Co)
18 April	Swan Co	2000
	To Purchase Return & Allowance		2000
	(Purchase allowance for defective item accounted for)
18 April	Cash	2000
	To Swan Co		2,000
	(Refund received for defective material)
23 April	Swan Co	23,000
	To Cash		23,000
	(Cash paid to Swan Co)
24 April	Purchases	9,400
	To Swan Co		9,400
	(Purchase made from swan co)
26 April	Freight Inwards	330
	To Cash		330
30 April	Swan Co	11,300
	To Purchases		11,300