Question

Exercise 5-4 On June 10, Tuzun Company purchased $6,650 of merchandise from Epps Company, FOB shipping point, terms 2/10, n/30. Tuzun pays the freight costs of $580 on June 11. Damaged goods totaling $350 are returned to Epps for credit on June 12. The fair value of these goods is $80. On June 19, Tuzun pays Epps Company in full, less the purchase discount. Both companies use a perpetual inventory system. Prepare separate entries for each transaction on the books of Tuzun Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

Date Account Titles and Explanation Debit Credit

Prepare separate entries for each transaction for Epps Company. The merchandise purchased by Tuzun on June 10 had cost Epps $5,000. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

Date Account Titles and Explanation Debit Credit

(To record credit sale) (To record cost of merchandise sold) (To record merchandise returned) (To record cost of merchandise returned) June 19

Answer 1

The term "FOB Shipping point" means," the Buyer takes delivery at Suppliers Shipping Dock as soon as the goods leaves the Supplier's Shipping Dock for delivery".

Term "2/10, n/30" means, 2% discount offered, if the payment is settled within 10 days, else, the payment falls due on 30th day.

Entries in Tuzun Books:

June 10, Purchase of goods

Inventory A/c Dr 6,650

To Accounts Payable A/c 6,650

(Goods purchased on credit)

June 11, Freight Charges paid

Inventory A/c Dr 580

To Cash A/c 580

(Freight charges paid)

June 12, Damaged Goods returned

Accounts Payable A/c Dr 350   

To Inventory 350

(Return of damaged goods)

June 19, Payment less Discount

Accounts Payable A/c Dr 6,237

Inventory A/c 63

To Cash 6,300

(Sales proceeds collected)

In the books of Epps

June 10, Sale of Goods:

Accounts Receivable A/c Dr 6,650

To Sales A/c 6,650

(Credit Sales)

Cost of Goods Sold A/c Dr 5,000

To Inventory 5,000

(Cost of sales recorded)

June 12, Return of damaged goods:

Sales A/c Dr 350

Accounts Receivable 350

(Return of damaged goods)

June 19th, Cash received from Epps:

Cash A/c Dr 6,237

Discount A/c Dr 63

To Accounts Receivable A/c 6,300

(Cash received against