Presented below are transactions related toWheeler Company 1. On December 3, Whe
ID: 2433804 • Letter: P
Question
Presented below are transactions related toWheeler Company
1. On December 3, Wheeler Company sold$500,000 of merchandise to Hashmi Co., terms 2/10, n/30, FOBshipping point. The cost of the merchandise sold was$350,000.
2. On December 8, Hashmi Co. was granted anallowance of $27,000 for merchandise purchase on December3.
3. On December 13, Wheeler Company receivedthe balance due from Hashmi Co.
Instructions:
(a) Prepare the journal entries to recordthese transactions on the books of Wheeler Company using aperpetual inventory system.
(b) Assume that Wheeler Company receivedthe balance due from Hasmi Co. on January 2 of the following yearinstead of December 13. Prepare the journal entry to record thereceipt of payment on January 2.
Please Show All Work, Thank You.
Explanation / Answer
1) AccountReceivable 500,000 Sales 500,000 Cost of GoodSold 350,000 MerchandiseInventory 350,000 FrightOut (not given) Cash (not given) FOB shipping point means seller paid for the shipping cost, and itdebit in account of Fright out or Shipping Expense 2) Sales Return andAllowance 27,000 AccountReceivable 27,000 Merchandise Inventory(i) 18,900 COGS 18,900 (i)27,000/500,000 * 350,000 = 18,900 This is calculating according to the proportion 3) Cash 463,540 SalesDiscount 9,460 AccountReceivable 473,000 Account Receivable = $500,000 - $27,000 = $473,000 Because the discount period is 10 days, there got 2% discount forthe sales, $473,000 * 0.02 = $9,460 Cash payment = $473,000 - $9,460 = $463,540 (b) It is over discount period already Cash 473,000 AccountReceivable 473,000
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