Purchased merchandise from Abilene Company for $6,000 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.
At Abilene's request, Stone paid $100 cash for freight charges on the August 1 purchase, reducing the amount owed to Abilene.
Sold merchandise to Lux Corp. for $4,200 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $3,000.
Purchased merchandise from Welch Corporation for $5,300 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. The invoice showed that at Stone’s request, Welch paid the $240 shipping charges and added that amount to the bill. (Hint: Discounts are not applied to freight and shipping charges.)
Paid $120 cash for shipping charges related to the August 5 sale to Lux Corp.
Lux returned merchandise from the August 5 sale that had cost Stone $500 and been sold for $700. The merchandise was restored to inventory.
After negotiations with Welch Corporation concerning problems with the merchandise purchased on August 8, Stone received a credit memorandum from Welch granting a price reduction of $800.
Received balance due from Lux Corp. for the August 5 sale less the return on August 10.
Paid the amount due to Welch Corporation for the August 8 purchase less the price reduction granted.
Sold merchandise to Trax Co. for $3,600 under credit terms of 1/10, n/30, FOB shipping point, invoice dated August 19. The merchandise had cost $2,500.
Trax requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Stone sent Trax a $600 credit memorandum to resolve the issue.
Received Trax's cash payment for the amount due from the August 19 sale.
Paid Abilene Company the amount due from the August 1 purchase.
Prepare journal entries to record the above merchandising transactions of Stone Company, which applies the perpetual inventory system. (Identify each receivable and payable; for example, record the purchase on August 1 in Accounts Payable—Abilene.)
This question was asked on Mar 24, 2012 and answered on Mar 25, 2012.
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