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On July 2, 2021, Blue Company sold to Sue Black merchandise
having a sales price of $10,500 (cost $6,300) with terms of 2/10.
n/30. f.o.b. shipping point. Blue estimates that merchandise with a
sales value of $900 will be returned. An invoice totaling $100,
terms n/30, was received by Black on July 6 from Pacific Delivery
Service for the freight cost. Upon receipt of the goods, on July 3,
Black notified Blue that $350 of merchandise contained flaws. The
same day, Blue issued a credit memo covering the defective
merchandise and asked that it be returned at Blue’s expense. Blue
estimates the returned items to have a fair value of $120. The
freight on the returned merchandise was $20 paid by Blue on July 7.
On July 12, the company received a check for the balance due from
Black.
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Prepare journal entries for Blue Company to record all the
events noted above assuming sales and receivables are entered at
gross selling price.
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Prepare the journal entry assuming that Sue Black did not remit
payment until August 5.