Question

The following selected transactions were completed by Affordable Supplies co., which sells supplies primarily to wholesalers and occasionally to retail customers.

Jan 6. Sold merchandise on account, $14,000, terms FOB shipping point, n/eom. The cost of merchandise sold was $8,400. Jan 8. Sold merchandise on account, $20,000, terms FOB destination, 1/10, n/30. The cost of merchandise sold was $14,000.

Jan 16. Sold merchandise on account $19,500, terms FOB shipping point, 1/10, n/30. The cost of merchandise sold was $11,700.

Jan 18. Recieved check of amount due for sale on jan 8.

Jan 19. Issued credit memorandum for $4,500 for merchandise returned from sale on jan 16. The cost of merchandise returned was $2,700.

Jan 26 Received check for amount due for sale on jan 16 less credit memorandum of jan 19 and discount.

Jan 31 Paid Cashell service $3,000 for merchandise delivered during jan to customers under shipping terms of FOB destination.

Jan 31 received check for amount dur for sale of jan 6.

Illustrate tge effects of each of the preceding transactions on the accounts and financial statements of affordable supplies co. Identify each transaction by date.

Answer 1

Solution:

Date             Accounts and explanations           Debit          

6-Jan                     Accounts receivable              14000

sales                                    14000

cost of merchandise             8400

merchandise inventory         8400

8-Jan                            Accounts receivable          20000

sales                                      20000

cost of merchandise              14000

merchandise inventory           14000

16-Jan                               Accounts receivable    19500

sales                                         19500

cost of merchandise                 11700

merchandise inventory             11700

18-Jan                                       cash                            20000

accounts receivable                20000

19-Jan                                  sales returns                      4500

account receivable                     4500

merchandise inventory               2700

purchase returns                         2700

26-Jan                                        cash                              14850

discount                                       150

Accounts receivable                  15000

31-Jan                              service charge                       3000

                                                  cash                               3000

31-Jan                                      cash                               14000

accounts receivable                                                       14000