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Chapter 5: Q7SE (page 296)

On November 4, 2018, Cain Company sold merchandise inventory on account to Tarin Wholesalers, \(12,000, that cost \)4,800. Terms 3/10, n/30. On November 5, 2018, Tarin Wholesalers paid shipping of $30. Tarin Wholesalers paid the balance to Cain Company on November 13, 2018.

Requirements

1. Journalize Tarin Wholesaler’s November transactions.

2. Journalize Cain Company’s November transactions.

Short Answer

Expert verified

Answer

The total of debits and credits of Tarin Wholesaler is$24,030.

The total of debits and credits of Cain Company is$28,080.

Step by step solution

01

Meaning of Commercial Activities

In business terms, commercial activities refer to the events that are conducted for the exchange of goods or services in the market to makeeconomic benefits. Commercial activities must beethical and should not harm the environment, society, and the parties involved.

02

Preparation of journal entries for Tarin Wholesaler

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Nov 4

Merchandise Inventory

12,000

Accounts payable

12,000

(To record the purchase of inventories)

Nov 5

Merchandise Inventory

30

Cash

30

(To record the payment of shipping cost)

Nov 13

Accounts payable

12,000

Cash (12,000-360)

11,640

Merchandise inventory (12,000*3%)

360

(To record the payment)

03

Preparation of journal entries for Cain Company

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Nov 4

Accounts receivable (12,000-3%*12,000)

11,640

Sales revenue

11,640

(To record the sales on account)

Nov 4

Cost of goods sold

4,800

Merchandise inventory

4,800

(To record the cost of goods sold)

Nov 13

Cash

11,640

Accounts receivable

11,640

(To record the receipt of payment)

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Most popular questions from this chapter

Describe FOB shipping point and FOB destination. When does the buyer take ownership of the goods, and who typically pays the freight?

The adjusted trial balance of Rachael Rey Music Company at June 30, 2018, follows:

RACHAEL REY MUSIC COMPANY

Adjusted Trial Balance

June 30, 2018

Balance

Account Title Debit Credit

Cash \(4,000

Accounts Receivable 38,400

Merchandise Inventory 18,100

Office Supplies 300

Furniture 39,900

Accumulated Depreciation-Furniture \)8,200

Accounts Payable 13,800

Salaries Payable 850

Unearned Revenue 7,500

Notes Payable, long-term 17,000

Common Stock 6,000

Retained Earnings 21,350

Dividends 40,000

Sales Revenue 184,000

Cost of Goods Sold 85,500

Selling Expense 18,600

Administrative Expense 12,000

Interest Expense 1,900

Total \(258,700 \)258,700

Requirements

1. Prepare Rachael Rey’s multi-step income statement for the year ended June 30, 2018.

2. Journalize Rachael Rey’s closing entries.

3. Prepare a post-closing trial balance as of June 30, 2018.

Journalize the following sales transactions for Straight Shot Archery using the periodic inventory system. Explanations are not required. The company estimates sales returns and allowances at the end of each month.

Aug. 1 Sold \(6,500 of equipment on the account; credit terms are 1/10, n/30.

8 Straight Shot received payment from the customer on the amount due from August 1, less the discount.

15 Sold \)3,100 of equipment on the account; credit terms are n/45, FOB destination.

15 Straight Shot paid \(90 on freight out.

20 Straight Shot negotiated a \)500 allowance on the goods sold on August 15.

24 Received payment from the customer on the amount due from August 15, less the allowance.

Consider the following transactions for Toys and More:

May 8 Toys and More buys \(113,300 worth of MegoBlock toys on account with credit terms of 2/10, n/60.

12 Toys and More returns \)11,250 of the merchandise to MegoBlock due to damage during shipment.

15 Toys and More paid the amount due, less the return and discount.

Requirements

1. Journalize the purchase transactions. Explanations are not required.

2. In the final analysis, how much did the inventory cost Toys and More?

Journalize the following transactions that occurred in February 2018 for Oceanic. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Oceanic estimates sales returns at the end of each month.

Feb. 3 Purchased merchandise inventory on account from Silton Wholesalers, \(5,200. Terms 2/15, n/EOM, FOB shipping point.

4 Paid freight bill of \)70 on February 3 purchase.

4 Purchased merchandise inventory for cash of \(1,500.

6 Returned \)900 of inventory from February 3 purchase.

8 Sold merchandise inventory to Herenda Company, \(5,600, on account. Terms 3/15, n/35. Cost of goods, \)2,352.

9 Purchased merchandise inventory on account from Teddy Wholesalers, \(7,000. Terms 1/10, n/30, FOB destination.

10 Made payment to Silton Wholesalers for goods purchased on February 3, less return and discount.

12 Received payment from Herenda Company, less discount.

13 After negotiations, received a \)500 allowance from Teddy Wholesalers.

15 Sold merchandise inventory to Jordon Company, \(3,400, on account. Terms n/EOM. Cost of goods, \)1,496.

22 Made payment, less allowance, to Teddy Wholesalers for goods purchased on February 9.

23 Jordon Company returned \(1,000 of the merchandise sold on February 15. Cost of goods, \)440.

25 Sold merchandise inventory to Smith for \(1,700 on account that cost \)663. Terms of 2/10, n/30 were offered, FOB shipping point. As a courtesy to Smith, $70 of freight was added to the invoice for which cash was paid by Oceanic.

27 Received payment from Smith, less discount.

28 Received payment from Jordon Company, less return.
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