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NP+10e+Ch05+Solutions

NP+10e+Ch05+Solutions - P5-2 Vargo Company(Perpetual...

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P5-2 Vargo Company (Perpetual Inventory) 1. Journal Entries 2. Cash Rebates 7-Oct Accounts Receivable $3,000 Cash rebates should not be recorded as revenue because it does not Sales $3,000 represent a transaction with the customer. Doing so would overstate Sold merchandise to Ken Smith, revenues. Cash rebates should be treated as Purchase Discounts and terms n/30, FOB shipping point deducted from Gross Purchases. 7-Oct Cost of Goods Sold $1,800 Merchandise Inventory $1,800 Value of inventory sold 8-Oct Merchandise Inventory $6,000 Accounts Payable $6,000 Purchased merchandise from Novak Co., terms n/30, FOB shipping pt. 9-Oct Freight-In $254 Cash $254 Paid Smart Co. for shipping charges 10-Oct Merchandise Inventory $9,000 Freight-In $600 Accounts Payable $9,600 Purchased merchandise from Mara's Co., terms n/30, FOB shipping pt. Reimbursed Mara's for freight costs 14-Oct Accounts Receivable $2,400 Sales $2,400 Sold merchandise to Rose Milito, terms n/30, FOB shipping point 14-Oct Cost of Goods Sold $1,440 Merchandise Inventory $1,440 Value of inventory sold 14-Oct Accounts Payable $600
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