ACCOUNTING apter 6 Homework Questions 3-5 (of 8) The following information appli

Question

ACCOUNTING apter 6 Homework Questions 3-5 (of 8) The following information applies to the questions displayed below. The transactions listed below are typical of those involving Amalgamated Textiles and American Fashions Amalgamated is a wholesale merchandiser and American Fashions is a retail merchandiser. Assume all sales of merchandise from Amalgamated to American Fashions are made with terms 3/10. n/30, and that the two companies use perpetual inventory systems. Assume the following transactions between the two companies occurred in the order listed during the year ended December 31. a. Amalgamated sold merchandise to American Fashions at a selling price of $245,000. The merchandise had cost Amalgamated $181,000 b. Two days later, American Fashions complained to Amalgamated that some of the merchandise differed from what American Fashions had ordered. Amalgamated agreed to give an allowance of $6,500 to American Fashions. c. Just three days later, American Fashions paid Amalgamated, which settled all amounts owed. value: 1.25 points

Explanation / Answer

Calculations and explanations:

Net amount due from American Fashions = 245,000 - 6,500 = $238,500

3% discount will be applicable on $238,500. Thus discount amount = 3% of 238,500 = $7,155

Cash paid by American Fashions = 238500-7155 = $231,345

No. Transaction General Journal Debit Credit 1 a(1) Accounts receivable          245,000.00 Sales      245,000.00 2 a(2) Cost of goods sold          181,000.00 Merchandise Inventory    181,000.00 3 b Sales return and allowances               6,500.00 Accounts receivable        6,500.00 4 c Sales discount               7,155.00 Cash          231,345.00 Accounts Receivable    238,500.00

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