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.
Required:
1) Effect :
No | Transaction | Amount | Direction |
a |
New Books sold merchandise to Readers’ Corner at a selling price of $615,000. The merchandise had cost New Books $441,000. |
615000 | + |
b |
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 $10,000 to Readers’ Corner. Readers’ Corner also returned some books, which had cost New Books $3,300 and had been sold to Readers’ Corner for $4,800. |
14800 | - |
c |
Just three days later, Readers’ Corner paid New Books, which settled all amounts owed. |
0 | NE |
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