Question

5.Thorsten Company, a trendy clothing retailer, had the following transactions in March:

March 2 Purchased merchandise from Sabine Company under the following terms: $1,800 invoice price, 2/15, n/60, FOB factory. (The cost of the merchandise to Sabine Company was $990.)

March 3 Paid UBS Shipping $125 for shipping charges on the purchase of March 2.

March 4 Returned to Sabine Company unacceptable merchandise that had an invoice price of $300 (and a cost to Sabine of $165). Sabine returned the merchandise to inventory.

March 17 Sent a cheque to Sabine Company for the March 2 purchase, net of the discount and the returned merchandise.

Required Assuming both Thorsten and Sabine use a perpetual inventory system:

a. Present the journal entries Thorsten Company should record for these transactions.

b. Present the journal entries Sabine Company should record for these transactions.

Answer 1

Thorsten Company Books:

Date	Accounts	Debit	Credit
Mar 2	Inventory	1,800
	Accounts Payable		1,800
Mar 3	Inventory Cash	125
	Cash		125
Mar 4	Accounts Payable	300
	Inventory		300
Mar 17	Accounts Payable	1,500
	Cash (1,500 x 98%)		1,470
	Inventory (1,500 x 2%)		30

Sabine Company Books:

Date	Accounts	Debit	Credit
Mar 2	Accounts Receivables	1,800
	Sales		1,800
	Cost of Goods Sold	990
	Inventory		990
Mar 3	No Entry
Mar 4	Sales Returns and Allowances	300
	Accounts Receivables		300
	Inventory	165
	Cost of Goods Sold		165
Mar 17	Cash (1,500 x 98%)	1,470
	Sales Discounts (1,500 x 2%)	30
	Accounts Receivables		1,500