Sky Company sold merchandise on account to Big Co., $72,000, terms FOB destinati

Question

Sky Company sold merchandise on account to Big Co., $72,000, terms FOB destination, 2/15, n/eom. The cost of the merchandise sold was $43,200. Sky Company paid freight of $3,000 for delivery of merchandise sold to Big Co. on May 1. Sky Company sold merchandise on account to Big Co., $48,500, terms FOB shipping point, n/eom. The cost of the merchandise sold was $30,000. Big Co. returned $12,000 of merchandise purchased on account on May 1 from Sky Company. The cost of the merchandise returned was $7,200. Big Co. paid freight of $1,800 on May 5 purchase from Sky Company. Sky Company sold merchandise on account to Big Co., $64,000, terms FOB shipping point, 1/10, n/30. Sky Company paid freight of $2,500, which was added to the invoice. The cost of the merchandise sold was $38,400. Big Co. paid Sky Company for purchase of May 1, less discount and less return of May 6. Big Co. paid Sky Company on account for purchase of May 15, less discount. Big Co. paid Sky Company on account for purchase of May 5.

Explanation / Answer

May 1 Acct Rxable Dr 72000 Sales Cr 72000 May 1 Cost of goods sold Dr 43200 Merchandise inventory Cr 43200 (Sky will pays shipping. Terms 2/15 N/eom) May 2 Fright expenses Dr 3000 Cash Cr 3000 (Sky pays Freinht for FOB shipment) May 5 Acct Rxable Dr 48500 Sales Cr 48500 May 5 Cost of goods sold Dr 30000 Merchandise inventory Cr 30000 (FOB Shipping pt indicated that Buyer-Big Co pays shipping & hence is recorded in Big Co books. Terms N/eom) 6 May Sales Return Dr 12000 Acct Rxable Cr 12000 6 May Merch Inv Dr 7200 COGS Cr 7200 (Record Sales returns of May1) 9 May - This journal entry will be in Big's Books & not in Sky's boooks. Fright expenses Dr 1800 Cash Cr 1800 (Big pays Freinht for FOB destination to shipper.) May 15 Acct Rxable Dr 66500 Sales Cr 64000 Freight Charges Cr 2500 May 15 Cost of goods sold Dr 38400 Merchandise inventory Cr 38400 (Terms 1/10,N/30) May 16 Cash Dr 58,800 Sales Disc Dr 1200 Acct Rxable Cr 60000 (Big get disc of 60000*2% = 1200) May 25 Cash Dr 63360 Fright charges Dr 2500 Sales Disc Dr 640 Acct Rxable Cr 66500 (Big get disc of 64000*1% = 640, Frieght of 2500 is paid in full, May 15) May 31Cash Dr 48500 Acct Rxable Cr 48500 (Big pays for Purch of May 5. No Disc)

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