The following is a series of related transactions between Siogo Shoes, a shoe wh
ID: 2338029 • Letter: T
Question
The following is a series of related transactions between Siogo Shoes, a shoe wholesaler, and Sole Mates, a chain of retail shoe stores: OBLEM 6.5A sing Feb. 9 Siogo Shoes sold Sole Mates 100 pairs of hiking boots on account, terms 1/10, n/30 nsactions el The cost of these boots to Siogo Shoes was S60 per pair, and the sales price was 510o per pair were split evenly between the buyer and seller and were paid immediately in cash size. Siogo Shoes allowed Sole Mates full credit for this return. Sole Mates paid the remaining balance due to Siogo Shoes within the discount period. Feb. 12 United Express charged $80 for delivering this merchandise to Sole Mates. These charges Feb. 13 Sole Mates returned to Siogo Shoes because they were the wrong Both companies use a perpetual inventory system. Instructions a. Record this series of transactions in the general journal of Siogo Shoes. (The company records b. sales at gross sales price.) Record this series of transactions in the general journal of Sole Mates.(The company records purchases of merchandise at net cost and uses a Transportation-in account to record transpor- tation charges on inbound shipments.) c. Sole Mates does not always have enough cash on hand to pay for purchases within the dis- count period. However, it has a line of credit with its bank, which enables Sole Mates to easilyExplanation / Answer
a Journal Entries in the Books of Siogo Shoes Date Transaction Debit Credit 9-Feb Accounts Receivable $10,000 To Sales $10,000 (Being merchandise sold on credit) 9-Feb Cost of Goods Sold $6,000 To Inventory $6,000 (Being cost of goods sold) 12-Feb Delivery Expense $40 To Cash $40 (Being delivery charges paid) 13-Feb Sales Returns and allowances $1,000 To Accounts Receivable $1,000 (Being merchandise returned by customer) 13-Feb Inventory $600 To Cost of Goods Sold $600 (Being cost of goods reduced due to return of merchandise) 19-Feb Cash $8,910 Sales Discount $90 To Accounts Receivable $9,000 (Being cash received on account) b Journal Entries in the Books of Sole Mates 9-Feb Inventory $9,900 To Accounts Payable $9,900 (Being merchandise purchased on credit) 12-Feb Transportation-In $40 To Cash $40 (Being transportation charges paid) 13-Feb Accounts Payable $990 To Inventory $990 (Being merchandise returned) 19-Feb Accounts Payable $8,910 To Cash $8,910 (Being cash paid for purchases) c The Sole mates should take advantage of the discount offered by the supplier, even if it has to borrowed the money to make payment on time to supplier By availing this discount the company is able to save 1% by paying 20 days early. The interest rate for 20 days is (11%*20/365) -0.60% Hence it can be seen that the cost of borrowing is less than the amount of discount received
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