tion.com The transactions listed below are typical of those invoing Southern Spo
ID: 2800880 • Letter: T
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tion.com The transactions listed below are typical of those invoing Southern Sporting Goods and Sports R Us Southern Sporting Goods is a wholesale merchandiser and Sports R Us is a retal merchandiser. Assume al sales of merchandise feom Southern Sporting Goods to Sports R Us are made with terms 2n0, n/30, and that the two companies use perpetual inventory systems. Assume the following transactions between the two companies occurred in the order listed during the year ended December 3t a Southern Sporting Goods sold merchandise to Sports R Us at a selling price of $135,000. The merchandise had cost Southern Sporting Goods $98,00o b. Two days later, Sports R Us complained to Southern Sporting Goods that some of the merchandise differed from what Sports R Us had ondered. Southen Sporting Goods sgreed to give an alowance of $4,000 to Sports R Us c. Just three days later Sports R Us paid Southern Sporting Goods, which settied all amounts owed 20. 5.00 points Required: 1. For each of the events (a) through (c), indicate the amount and direction of the effect on Southem Sporting Goods in terms of the following tems. (Enter any decreases to account balances with a minus sign.) Transaction SalesReturns Revenue and Sales Discounts Net Sales Cost of Goods Sold Gross ProfitExplanation / Answer
Requirement 1 for each item of the events (a) through (c ) , indicate the amount and direction on southern sporting goods in terms of following items Transction Sales revenue Sales returns & allownace Sales Discounts Net sales Cost of goods sold Gross profit a $135000 $135000 ($98000) $37000 b $4000 c (No effect) requirement 2 Income Statement Likely to be reported Net Sales Reported on External Financial statements sales return and Allowances Behind the scenes Sales Discounts Behind the scenes Cost of goods sold Reported on External Financial statements Sales revenue Reported on External Financial statements Gross profit Reported on External Financial statements Requiremetn 3 Journal entries date Account titles & Explanation Debit Credit 1 Account receivables A/c $135000 To Sales A/c $135000 (Being sales on account has been recorded) 2 Cost of goods sold A/c $98000 To Inventory A/c $98000 (being cost of goods sold has been recorded) 3 Sales returns & allownaces $4000 To Account receivables A/c $4000 (being Sales allownces given has been reocorded) 4 Cash A/c $131000 To Account receivables A/c $131000 (being payment received from customer has bben reocrded)
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