Question 4) The following transactions are for Solarte Company: On December 3, S

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Question 4) The following transactions are for Solarte Company: On December 3, Solarte Company sold $700,000 of merchandise to Rooney Co., terms 4/10, n/30. The cost of the merchandise sold was $380,000. On December 8, Rooney Co. was granted an allowance of $35,000 for merchandise purchased on December 3 On December 13, Solarte Company received the balance due from Rooney Co. Instructions (in color) Prepare the journal entries to record these transactions on the books of Solarte Company. Solarte uses a perpetual inventory system A. B. Assume that Solarte Company received the balance due from Rooney Co. on January 2 of the following year instead of December 13. Prepare the journal entry to record he receipt of payment on January 2

Explanation / Answer

A.

B.

Date Particulars Dr. Cr 03-Dec Accounts Receivables 700,000 Sales 700,000 03-Dec Cost of Goods Sold 380,000 Inventory 380,000 08-Dec Sales Returns and allowances 35,000 Accounts Receivables 35,000 13-Dec Cash 638,400 Sales Discount ((700000-35000)*0.04) 26,600 Accounts receivable (700000-35000) 665,000 (Since he paid within 10 days, he will receive a discount of 4%)

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