Solutions for both sums Problem 5-2A ving transactions occurred between Chao Pha

Question

Solutions for both sums Problem 5-2A ving transactions occurred between Chao Pharmaceuticals and Hal's Drug Store of the current year. Both companies use the perpetual inventory system. during Feb Feb. Hall purchased $60,000 of merchandise from Chao on credit terms of 1/10, n/30, FOB shipping point. Separately, Hall paid a $1,000 bill for freight in. Chao invoiced Hall for $60,000 (these goods cost Chao $36,000). o Hall returned $5,000 of the merchandise purchased on February 6. Chao issued a credit memo for this amount and returned the goods to inventory (cost, $3,000). Hall paid $24,000 of the invoice amount owed to Chao for the February 6 purchase. Chao allows its customers to take the cash discount on partial payments. Hall paid the remaining amount owed to Chao for the February 6 purchase. 15 Required Journalize these transactions, first on the books of Hall Drug Store and second on the books of Chao Pharmaceuticals. Problem 5-3A Singh Distributing Company uses the perpetual inventory system and engaged in the following transactions during May of the current year: May 3 Purchased office supplies for cash, $11,000 7 Purchased inventory on credit terms of 3/10, net eom, $76,000. S Returned 10 Sold goods for cash, $17,000 (cost,$10,200), 13 Sold inventory on credit terms of 2/15, n/45, for $150,800, less $15,080 quantity 1b Paid the amount owed on account from the purchase of May 7, less the discount 17 25 percent of the inventory purchased on May 7. It was not the inventory ordered. discount offered to customers who purchased in large quantities (cost, $90,480). and the return. Received wrong-sized inventory as a sales return from May 13 sale, $12,400, which is the net amount after the quantity discount. Singh's cost of the inven- tory received was $7,440. Purchased inventory of $164,000 on account. Payment terms were 2/10, net 30. Paid supplier for goods purchased on May 18. 18 26 28 Received cash in full settlement of the account from the customer who pur- 31 Purchased chased inventory on May 13. inventory for cash, $84,000, less a quantity discount of $8,400, plus freight charges of $2,200.

Explanation / Answer

5-2A Assumed that all transactions paid via bank In the books Of Chao $ $ In the books of Halls Drug Store $ $ 06-Feb Halls…. Dr. 60000 06-Feb Purchases…. Dr. 60000 To Sales 60000 To Chao 60000 Assumed that freight was paid to transporter and not to Chao so not accounted 06-Feb Freight in….. Dr. 1000 To Bank 1000 10-Feb Sales Return…. Dr. 5000 10-Feb Chao…. Dr. 5000 To Halls 5000 To Purchase Return 5000 15-Feb Bank…Dr. 23760 15-Feb Chao…Dr. 24000 Discount Allowed… Dr. 240 To Bank 23760 To Halls 24000 To Discount Received 240 (1% discount calculated as per credit terms on 24000 since payment has been made within 10 days and Chao allows discount on partial payments) (1% discount calculated as per credit terms on 24000 since payment has been made within 10 days and Chao allows discount on partial payments) 27-Feb Bank…Dr. 31000 27-Feb Chao… Dr. 31000 To Halls 31000 To Bank 31000 (No discount since rest of the amount has been paid after 10 days of purchase) (No discount since rest of the amount has been paid after 10 days of purchase) 5-3A In the Books of Singh Distributing Co $ $ 03-May Office Supplies…Dr 11000 To Cash 11000 07-May Purchases… Dr. 76000 To Creditors 76000 (3/10 Net EOM) 08-May Creditors… Dr. 19000 To Purchase Return 19000 (25% purchase return) 10-May Cash…Dr. 17000 To Sales 17000 (Cost 10200) 13-May Debtors…Dr. 135720 To Sales 135720 (Quantity discounts will not be recorded in journal only cash dscounts will be recorded), Terms:2/15n45 16-May Creditors… Dr. 57000 To Cash 55290 To Discount received 1710 (since amt paid within 10 days of purchase discount of 3% availed) 17-May Sales Return… Dr. 12400 To Debtors 12400 (goods returned because of wrong order size) 18-May Purchases… Dr. 164000 To Creditors 164000 (2/10 net 30) 26-May Creditors… Dr. 164000 To Cash 160720 To Discount received 3280 (2% Discount availed since payment made within 10 days) 28-May Cash…Dr. 120854 Discount Allowed… Dr. 2466 To Debtors 123320 (Discount of 2% allowed since payment has been made exactly in 15 days) 31-May Purchases… Dr. 75600 Freight Charges… Dr. 2200 To Cash 77800 (Quantity discount wont be recorded in journal amount net of interest will only be recorded)

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