Tho following soloctod tranaactions wore comploted during Auguat batwoon Summit

Question

Tho following soloctod tranaactions wore comploted during Auguat batwoon Summit Company and Beartooth Co: (2) Journalize the August transactions or Beano th Co Refer to the Chart of Accounts of the appropriato company for exact wor ng of account Aug. 1 Summit Compeny sold merchandise on account to Beartocth Co $49,550, terma FOB destination, 215, nicom. The oost of the goods oold was $30,000. Summit Compeny paid freight of $1,265 for delivery of merchanise sold to Beartooth Co, on August 1 Summit Company sold merchandise on account to Beartooth Co, $59,580, terma FOB shipping point, nveam. The coat of the goods sold was $43,840. 2 PAGE 15 Score: 168176 ACCOUNTING EQUATION DEBT CREDIT ASSETS L?ABILITIEQUTY JOURNAL DATE 48,559 9 Beartooth Co. peid teight of S2,290 on August 5 purchase feom Summit Compeny. Accounts Payabe Sanmit Conpany 1 Summit Company sold merchandise on account to Beartocth Co 356,100, terms FOB shipping point, 110, v30. Summit Company paid freight of $1,715, which was added to the invoioe. The coat of the goods sold was $36,310. Arcounts Payabe Sunmh Company 9,562 5u Invertory ,79 1 Beartooth Co. peid Summit Company for purchase of August 1. 2? Beartooth Co. paid Summit Company on account for purchase of 7Aug1 Inventory 578150 August 15 Beartooth Co. paid Summit Company on apcount for purchase of August 5 Accounts Payabe Sunmit Conpany 57,815.00 31 10 Aug2 Cs 5725410 Jownalzo the August transactons for (1) Sumit Company and (2) Boartooth Ca. Rofor to the Chart of Acconts of the appropiato company for axact wording of account wea. Accounts PayabieSanmi Compary Accouns Payabie-Summit Company 5Aug Cash 5956 ? Points. '33.41 ,35 ASSETS REVENUE 110 Cash 120 Accounts Receivable 125 Notea Receivable 130 Invontory 131 Estimated Retums Inventory 140 Otice Supplies 141 Store Supplies 142 Prepaid Iinsurance 410 Sales 610 Interest Revenue EXPENSES 510 Coat of Gooda Sold 521 Delivery Expon0 522 Advertising Expense

Explanation / Answer

Answers

You have mis calculated the amount that is due on Purchases.
Purchases are recorded using Net recording method (as you recorded in entry on Date Aug 1)

Discount term is 1/10.
Inventory purchased = $56,100
Net Amount of purchased = 56100 – 1% discount = $ 55,539

Amount of Freight = $ 1,715

Total amount payable to Summit Company = 55539 + 1715 = $ 57,254

Correct Entry on Aug 15:

Date

Accounts title

Debit

Credit

Asset

Liability

Equity

Aug-15

Inventory

$                             57,254.00

Increase

Accounts Payable - Summit Company

$               57,254.00

Increase

(merchandise purchased on account, including freight, using Net method

Amount paid equals to the amount calculated above as ‘payable’.

But you have made mistake while recording Accounts.

When payment is made, Accounts payables are DEBITED, and Cash is CREDITED (as you did correctly in Entry on Aug 16)

Correct entry on Aug 25 would be:

Date

Accounts title

Debit

Credit

Asset

Liability

Equity

Aug-25

Accounts Payable - Summit Company

$                             57,254.00

Decrease

Cash

$               57,254.00

Decrease

(balance paid)

Date

Accounts title

Debit

Credit

Asset

Liability

Equity

Aug-15

Inventory

$                             57,254.00

Increase

Accounts Payable - Summit Company

$               57,254.00

Increase

(merchandise purchased on account, including freight, using Net method

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