Ch. 5 Fundamentals of Accounting Problem 5-2a
Prepare journal entries to record the following merchandisingtransactions of Sheng Company, which applies the perpetualinventory system. (Hint: It will help to identify each receivableand payable; for example, record the purchase on August 1 inAccounts Payable-Arotek.)
Aug. 1- Purchased merchandise from Arotek Company for $7,500under credit terms of 1/10, n/30, FOB destination, invoice datedAugust 1.
August 5- Sold merchandise to Laird Corp. for $5,200 undercredit terms of 2/10, n/60, FOB destination, invoice dated August5. The merchandise had cost $4,000.
August 8- Purchased merchandise from Waters Corporation for$5,400 under credit terms of 1/10, n/45, FOB shipping point,invoice dated August 8. The invoice showed that at Sheng's request,Waters paid the $140 shipping charges and added that amount to thebill. (Hint: Discounts are not applied to freight and shippingcharges.)
August 9- Paid $125 cash for shipping charges related to theaugust 5 sale to Laird Corp.
August 10- Laird returned merchandise from the August 5 salethat had cost Sheng $400 and been sold for $600. The merchandisewas restored to inventory.
August After negotiations with Waters Corp. concerningproblems with the merchandise purchased on August 8, Sheng receiveda credit memorandum from Waters granting a price reduction to$700.
August 14- At Arotek's request, Sheng paid $200 cash for freightcharges on the August 1 purchase, reducing the amount owed toArotek.
August 15- Received balance due from Laird Corp. for the August5 sale less the return on August 10.
August 18- Paid the amount due Waters Corp. for the August 8purchase less the price reduction granted.
August 19- Sold merchandise to Tux Co. for $4,800 under creditterms of 1/10, n/30, FOB shipping point, invoice dated August 19.The merchandise had cost $2,400.
August 22- Tux requested a price reduction on the August 19 salebecause the merchandise did not meet specifications. Sheng sent Tuxa $500 credit memorandum to resolve the issue.
August 29- Received Tux's cash payment for the amount due fromthe August 19 sale.
August 30- Paid Arotek Company the amount due from the August 1purchase.