Question

On Dec 2, Silver Limited (Silver) purchases merchandise for resale from Platinum Company (Platinum) with an invoice price of $36,000 and credit terms 2/15, n/90, FOB shipping point. The goods cost Platinum $22,000. On Dec 4, Silver pays shipping charges of $450 on Dec 2 purchase.
On Dec 6, Silver returns unacceptable merchandise to Platinum that has an invoice price of $2,000. The retuned goods cost Platinum $1,100. On Dec 10, Sliver discovers that $1,000 of goods are damaged but are still of some use and, therefore, keeps the units. Platinum sends Silver a credit memorandum for $500 to compensate for the damage. On Dec15, Silver pays for the amount owed and Platinum receives it on the same day. (Both Silver and Platinum use a perpetual inventory system.)
Required
1. Prepare journal entries that Platinum Company records for each transaction in December.
2. Prepare journal entries that Silver Limited records for each transaction in December.
(No narration is required)

Answer 1

1)IN BOOKS OF PLATINUM COMPANY :

DATE	ACCOUNT TITLE	DEBIT	CREDIT
Dec 2	Accounts receivable	36000
	sales revenue		36000
	[To record sales revenue]
	cost of goods sold	22000
	Merchandise inventory		22000
	[To record cost of sales]
Dec 6	Sales return and allowance	2000
	Accounts receivable		2000
	Merchandise inventory	1100
	cost of goods sold		1100
Dec 10	sales return and allowance	500
	Accounts receivable		500
Dec 15	cash	32830
	Sales discount [33500*2%]	670
	Accounts receivable [36000 -2000-500]		33500

since amount is received within discount period ,discount of 2 % is payable.

2)IN BOOKS OF SILVER COMPANY

DATE	ACCOUNT TITLE	DEBIT	CREDIT
Dec 2	Merchandise inventory	36000
	Accounts payable		36000
Dec 4	Merchandise inventory	450
	cash		450
Dec 6	Accounts payable	2000
	Merchandise inventory		2000
Dec 10	Accounts payable	500
	Merchandise inventory		500
Dec 15	Accounts payable	33500
	Merchandise inventory		670
	cash		32830