On January 2, 2016, MM, Inc. shipped 100 drone aircraft to CCP Company having a

Question

On January 2, 2016, MM, Inc. shipped 100 drone aircraft to CCP Company having a total selling price of $60,000 (cost $26,000) with terms 2/10, n/30, f.o.b., shipping point. MM allows CCP to return product that are not satisfactory. The 6 conditions for the right of return are met. An invoice totaling $120, terms n/30 was received by CCP on January 6 from LLD Delivery Service for the freight cost. Upon receipt of the goods, on January 3, CCP notified MM that $250 of drone aircraft contained flaws. The same day, MM issued a credit memo covering the defective drone aircraft and stated that it be returned at MM’s expense. The freight on the returned drone aircraft was $20 paid LLD Delivery Service on January 7. On January 12, the MM received an electronic deposit for the balance due CCP.

Instructions:

a) Prepare journal entries for MM, Inc. to record all the events noted above.

b) Prepare the journal entries for CCP Company to record all of the events noted.

c) Prepare journal entries for LLD Delivery Service to record all the events noted above.

Explanation / Answer

(All amounts in $) Date Particulars Debit Credit Journal Entries in the books of MM Inc. 02/01/2016 CCP Company A/c DR 60000 To Sales A/c 60000 02/01/2016 Cost of Goods Sold A/c DR 26000 To Inventory A/c 26000 03/01/2016 Sales Returns A/c DR 250 To CCP Company A/c 250 07/01/2016 Freight A/c DR 20 To LLD Delivery Service A/c 20 12/01/2016 Bank A/c DR 58555 Discount A/c DR 1195 To CCP Company A/c 59750 Journal entries in the books of CCP Company 02/01/2016 Purchase A/c DR 60000 To MM Inc A/c 60000 03/01/2016 MM Inc A/c DR 250 To Purchase Returns A/c 250 06/01/2016 Freight A/c DR 120 To LLD Delivery Service A/c 120 12/01/2016 MM Inc A/c DR 59750 To Bank A/c 58555 To Discount A/c 1195 Journal entries in the books of LLD Delivery Service 06/01/2016 CCP Company A/c DR 120 To Freight Income A/c 120 07/01/2016 MM Inc A/c DR 20 To Freight Income A/c 20

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