5. Merchandise with a list price of $3,800 and costing $2.,000 is sold on accoun

Question

5. Merchandise with a list price of $3,800 and costing $2.,000 is sold on account, subject to the following terms: FOB shipping point, 2/10, n/30. The seller prepays the $50 shipping charges and bills the customer, (seller pays Cash). Prior to payment for the goods, the seller issues a credit memorandum for $800 to the customer for merchandise costing $500 that is returned. The correct amount is received within the discount period. Record the foregoing transactions of the seller in the sequence indicated below. (a) (b) (c) (d) Sold the merchandise, recognizing the sale and cost of merchandise sold. Paid the transportation charges. Issued the credit memorandum. Received payment from the customer. Description Post Ref Debit Date Credit

Explanation / Answer

No. General Journal Debit Credit (a) Accounts Receivable 3800 Sales 3800 Cost of Merchandise Sold 2000 Merchandise Inventory 2000 (b) Accounts receivable – Freight 50 Cash 50 (c ) Sales Returns and Allowances 800 Accounts Receivable 800 Merchandise Inventory 500 Cost of Merchandise Sold 500 (d) Cash (3800-800) x 98% + 50 2990 Sales Discounts (3000 x 2%) 60 Accounts Receivable (3800-800) 3000 Accounts receivable – Freight 50

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