Question

Journalize the following transactions for ABC Corporation.

They are a boot retailer and use the PERPETUAL inventory.

9.5.14   Purchased $40,000 of boots on account from ZQY, Inc. Terms were 5/10 n/30.                                                                                                                                                                            

9.10.14 Returned $3,000 of boots to ZQY, Inc.                                                                                                                                                                        

9.15.14 Received a freight bill for $700.                                                                                   

Invoice related to the shipment of boots received from ZQY, Inc. on 9.5.14. Terms were FOB Destination.                                                                                                                                                                        

9.17.14 Sold $6,000 of boots to Winter’s Business on account. Terms were 3/10 n/30.                                       

              The boots cost to ABC Corporation was $3,000.                                                       

                                                                                 

9.20.14 Winter’s Business returned $1,000 of the boots sold on 9.17.14.                                                      

                          

10.2.14 Winter’s Business paid the full amount due.                                                                                         

                                        

10.5.14 Paid ZQY, Inc. the amount due.                                                                                    

QUESTIONS

                                                                                                             

1. How much does Winter’s Business owe at the end of September 2014?                                                   

                                                                    

2. What is the balance in the Sales Discount account at the end of September 2014?                                       

                                                                                                             

3. What is the balance in the Purchases account at the end of September 2014?                                               

                                                                    

4. How much does ABC Corporation owe ZQY, Inc. at the end of September 2014?                                       

                          

5. What is the balance in the Inventory account at the end of September 2014?                                                                                                     

Answer 1

Ans:1. Winter’s Business owe at the end of September = $ 6000-1000 = $ 5000

2. balance in the Sales Discount account at the end of September 2014= NIL. (As the ten days to pay the due amount had expired so the buyer is not qualified for any discount at the month end)

3. balance in the Purchases account at the end of September 2014= $ 40000-3000 = $ 37000

4.ABC Corporation owe ZQY, Inc. at the end of September 2014 = $ 40000+700-3000= $ 40700

Assumed : $ 700 freight bill is being received from ZQY Inc.

5.balance in the Inventory account at the end of September 2014= Purchased- Cost of Goods Sold + Cost of goods sold returned = $ 37000-3000+500 = $ 34500