Sales-Related and Purchase-Related Transactions for Seller and Buyer Using Perpe
ID: 2544421 • Letter: S
Question
Sales-Related and Purchase-Related Transactions for Seller and Buyer Using Perpetual Inventory System
The following selected transactions were completed during April between Swan Company and Bird Company:
Required:
1. Journalize the April transactions for Bird Company (the buyer).
2. Journalize the April transactions for Swan Company (the seller).
Apr.2. Swan Company sold merchandise on account to Bird Company, $18,400, terms FOB shipping point, 1/10, n/30. Swan Company paid freight of $400, which was added to the invoice. The cost of the merchandise sold was $11,600. 8. Swan Company sold merchandise on account to Bird Company, $23,000, terms FOB destination, 2/15, n/30. The cost of the merchandise sold was $13,800. 8. Swan Company paid freight of $730 for delivery of merchandise sold to Bird Company on April 8. 12. Bird Company paid Swan Company for purchase of April 2. 18. Swan Company paid Bird Company a refund of $2,000 for defective merchandise in the April 2 purchase. Bird Company agreed to keep the merchandise. 23. Bird Company paid Swan Company for purchase of April 8. 24. Swan Company sold merchandise on account to Bird Company, $9,400, terms FOB shipping point, n/45. The cost of the merchandise sold was $5,600. 26. Bird Company paid freight of $330 on April 24 purchase from Swan Company. 30. Swan Company granted a customer allowance (credit memo) to Bird Company for $11,300 for merchandise that was returned from the August 24 purchase. The cost of the merchandise returned was $6,500.Explanation / Answer
Important Note -
FOB destination - In this kind of sale, the seller assumes the all the responsbility for freight etc and risk till the time the goods reaches the destination.
FOB Shipping - In this kind of sale, the responsibility of the seller is till the shipping point. Any expense or risk post that is borne by Buyer.
Journal - Swan Co
2 Apr
To Inventory
(Cogs Accounted for)
To Sales
8 April
8 April
(Since it is FOB destination sale hence freight charges are Seller's responsibility)
18 April
18 April
23 April
23,000
24 April
24 April
30 April
30 April
Date
Journal Bird CO
Accounts Title
8 April
12 April
18 April
18 April
(Refund received for defective material)
23 April
24 April
26 April
30 April
Date Accounts Title Debit ($) Credit ($) 2-April Bird Co 18,400 To Sales 18,000 To Cash 400 (Freight paid on behalf of Bird Co for FOB shippingpoint sale hence not charges of as expense)
2 Apr
Cost of Goods Sold 11,600To Inventory
(Cogs Accounted for)
11,600 8-Apr Bird Co 23,000To Sales
23,000 (FOB destination sale to Bird co.)8 April
Cost of Goods Sold 13,800 To Inventory 13,8008 April
Freight Outwards 730 To Cash 730(Since it is FOB destination sale hence freight charges are Seller's responsibility)
12 April Cash 18,400 To Bird Co 18,400 (Cash received from Bird Co)18 April
Sales Return & Allowance 2,000 To Bird Co 2,000 (Sales allowance accounted for, no impact on COGS since material not returned)18 April
Bird Co 2,000 To Cash 2,000 (Refund paid for defective material to Bird Co)23 April
Cash 23,000 To Bird Co23,000
(Cash received from Bird Co)24 April
Bird CO 9400 To Sales 9,400 (Sales made to Bird on FOB shipping point)24 April
Cost of Goods Sold 5,600 To Inventory 5,60030 April
Sales Return & Allowance 11,300 To Bird Co 11,300 (Credit Memo issued for Sales return)30 April
Inventory 5,600 To Cost of Goods Sold 5,600 (Sales return accounted for in COGS)Date
Journal Bird CO
Accounts Title
Debit ($) Credit ($) 2 April Purchases 18,000 Freight Inwards 400 To Swan Co 18,400 (Freight and Purchase on FOB shipping accounted for)8 April
Purchases 23,000 To Swan Co 23,00012 April
Swan Co 18,400 To Cash 18,400 (Cash paid to Swan Co)18 April
Swan Co 2000 To Purchase Return & Allowance 2000 (Purchase allowance for defective item accounted for)18 April
Cash 2000 To Swan Co 2,000(Refund received for defective material)
23 April
Swan Co 23,000 To Cash 23,000 (Cash paid to Swan Co)24 April
Purchases 9,400 To Swan Co 9,400 (Purchase made from swan co)26 April
Freight Inwards 330 To Cash 33030 April
Swan Co 11,300 To Purchases 11,300Related Questions
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