Question

Presented here are selected transactions for Alpine Tours Inc. during September of the current year. Alpine Tours uses a perpetual inventory system.

Sept. 2 Purchased equipment on account for $69,500, terms n/30, FOB destination. 3 Freight charges of $880 were paid by the appropriate party on the September 2 purchase of equipment. 4 Purchased supplies for $3,800 cash. 6 Purchased inventory on account from Winterholt Company at a cost of $62,500, terms 1/15, n/30, FOB shipping point. 7 Freight charges of $1,600 were paid by the appropriate party on the September 6 inventory purchase. 8 Returned damaged goods costing $5,500 that were originally purchased from Winterholt Company on September 6. Received a credit on account. 9 Sold goods costing $16,100 to Fischer Limited for $19,600 on account, terms 2/10, n/30, FOB destination. 10 Freight charges of $370 were paid by the appropriate party on the September 9 sale of inventory. 17 Received the balance due from Fischer. 20 Paid Winterholt Company the balance due. 21 Purchased inventory for $5,400 cash. 22 Sold inventory costing $18,700 to Kun-Tai Inc. for $27,300 on account, terms n/30, FOB shipping point. 23 Freight charges of $600 were paid by the appropriate party on the September 22 sale of inventory. 28 Kun-Tai returned goods sold for $10,000 that cost $6,900. The merchandise was restored to inventory. Write the journal entires

Answer 1

Alpine Tours Inc.

(for the month of September)

1. Equipment A/c Dr $69,500

To Creditor A/c $69,500

(Being purchased equipment for $69500, n/30 means payment is to be made within 30 days of sale occured, FOB(Free on board destination) destination means untill the goods delivered to buyer by carrier goods remain part of seller's stock and expenses bear by the seller)

2. No entry would be passed by the Alpine tours as the sales is FOB destination. and the expenses will be bear by seller.

3. Sept 2 Supplies on hand A/c dr $3,800

To Cash A/c $ 3,800

(Being Supplies purchased by the Alpine, in cash. Supplies on hand debit because it increases asset side of Balance sheet and simultaneously cash credit because asset decreases by expending cash )

4. Inventory a/c Dr $62,500

   To Winterholt company A/c $62,500

(Being inventory purchased from Winterholt on credit, here term 1/15. n/30 means 1% discount is given if the payment is made within 15 days else full payment is to be made with in 30 days, FOB shipping point means during transit title owner of goods is purchaser and he will bear cost of carrier.)

5. Sept 6, Inventory a/c Dr $1,600

To Cash A/c $1,600

(Being Freight charges were paid by purchaser because purchase is FOB shipping point, Inventory account is debit because same is perpetual inventory Method)

6. Sept 6, Winterholt company a/c Dr $5,500

To Inventory A/c $5,500

(Being damaged goods worth rs $5,500 were returned to winterholt company)

7. A. Fischer limited a/c dr $19,600

To sales $19,600

(Being goods sold to fischer ltd for $19,600 on credit for a term 2/10, n/30 FOB Destination)

B. Cost of goods sold a/c dr $16,100

To Inventory A/c $16,100

(Being sold inventory transfered to COGS)

8. Sept 9 Inventory A/c dr $ 370

To Cash A/c $370

(Being freight charges were bear by the alpine as a seller because transaction is FOB destination)

9. A. Cash A/c Dr $19,208

To Fischer Limited A/c $19208

(being payment is recieved in 10 days 2% discount given 19600-19600*2%=19208)

B. Discount A/c Dr $392

To Inventory A/c $392

(being discount is allowed for pmt made within 10 days)

9. A. Winterholt a/c Dr $56,430

To Cash A/c $56430

(Being Payment made to winterholt with 1% discount as term was1/15, n/30)

B. Inventory A/c Dr. $570

To Discount A/c $570

(Being 1% discount recieved from winterholt for payment made within 15 days)

10. Inventory A/c Dr $ 5,400

To Cash A/c $ 5,400

(Being Inventory purchased for $5400 in cash)

11. A. Kun-Tai Inc a/c dr $27,300

To sales $27,300

(Being goods sold to fischer ltd for $27,300 on credit for a term n/30 FOB Destination)

B. Cost of goods sold a/c dr $18,700

To Inventory A/c $18,700

(Being sold inventory transfered to COGS)

12. No entry will be made in Alpine books as the transaction was FOB Shipping point liability to pay freight is lying with purchaser i.e Kun-Tai Inc.

13. A. Sales dr $10,000

To Kun-Tai Inc A/c $10,000

(Goods costing $10,000 return by the Kun-Tai Inc)

B. Inventory A/c Dr $6,900

To Cost of Goods Sold A/c $6,900

(Being goods restored to inventory again)