Spare Parts was organized on May 1, 2011, and made its first purchase of merchan

Question

Spare Parts was organized on May 1, 2011, and made its first purchase of merchandise on May 3. The purchase was for 1,000 units at a price of $10 per unit. On May 5, Spare Parts sold 600 of the units for $14 per unit to DeSoto Co. Terms of the sale were 2/10, n/60.

a.
On May 7, DeSoto returns 200 units because they did not fit the customer's needs. Spare Parts restores the units to its inventory.
b. On May 8, DeSoto discovers that 50 units are damaged but are still of some use and, therefore, keeps the units. Spare Parts sends DeSoto a credit memorandum for $300 to compensate for the damage.
c.
On May 15, DeSoto discovers that 72 units are the wrong color. DeSoto keeps 43 of these units because Spare Parts sends a $92 credit memorandum to compensate. DeSoto returns the remaining 29 units to Spare Parts. Spare Parts restores the 29 returned units to its inventory.

Explanation / Answer

May 3 Merchandise Inventory Dr 10,000 Acct Payable Cr 10,000 (To recrd Pur of 1000 units @$10 = $10000) May 5 Acct Rxable Dr 8400 Sales Cr 8400 May 5 Cost of goods sold Dr 6000 Merchandise inventory Cr 6000 (Sold merchandise on credit, recorded COGS also, Term 2/10, n/60) Desoto Journal : May 7 Acct Paybale Dr 2800 Merc Inv Cr 2800 (Return merchandise) May 8 Pur Ret & Allow Dr 300 Acct Payable Cr 300 (Damaged Goods) May 15 Pur Ret & Allow Dr 92 Acct Payable Cr 92 (Damaged Goods) May 15 Acct Paybale Dr 406 Merc Inv Cr 406 (Return merchandise 29@$14 = $406)

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.