50.1K

Verified Solution

Link Copied!

The transactions listed below are typical of those involving New Books Inc. and Readers Corner. New Books is a wholesale merchandiser and Readers Corner is a retail merchandiser. Assume all sales of merchandise from New Books to Readers Corner are made with terms n/30, and the two companies use perpetual inventory systems. Assume the following transactions between the two companies occurred in the order listed during the year ended August 31.

1. New Books sold merchandise to Readers Corner at a selling price of $555,000. The merchandise had cost New Books $417,000.
2. Two days later, Readers Corner complained to New Books that some of the merchandise differed from what Readers Corner had ordered. New Books agreed to give an allowance of $10,500 to Readers Corner. Readers Corner also returned some books, which had cost New Books $2,100 and had been sold to Readers Corner for $3,600.
3. Just three days later, Readers Corner paid New Books, which settled all amounts owed.

2. Prepare the journal entries to record New Books transactions. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Record the sales on account of $555,000 to Readers Corner on terms n/30.

Record the cost of goods sold of $417,000.

Record the return of $14,100 unsatisfactory merchandise by Readers Corner for which credit was given to the customer.

Record the cost of goods sold adjustment to inventory.

Record the receipt of payment in full from Readers Corner.

> Answer is complete but not entirely correct. No General Journal Credit Transaction a(1) Debit 555,000 Inventory Accounts Payable 555,000 a(2) 417,000 Cost of Goods Sold Inventory 417.000 b(1) 14,100 Accounts Payable Inventory 14,100 b(2) 3,600 Accounts Payable Inventory 3,600 X 540,900 Accounts Payable Cash 540,900

Answer & Explanation Solved by verified expert

See Answer