Question

Jun    4      Willem Corporation purchased $4,000 worth of merchandise, terms n/30 from Cate Corporation. The cost of the merchandise to Cate was $2,600. Returns are estimated at 15%.
        10       Willem returned $700 worth of goods to Cate for full credit. The goods had a cost of $450 to Cate and were placed back into inventory.
        26       Willem paid the account.
Instructions
Prepare the journal entries to record these transactions in (a) Willem’s records and (b) Cate’s records. Both companies use the perpetual inventory system.

Answer 1

(a) Willem’s records

Date	Accounts	Debit	Credit
June 4	Inventory	4,000
	Accounts payable - Cate Corporation		4,000
June 10	Accounts payable - Cate Corporation	700
	Inventory		700
June 26	Accounts payable - Cate Corporation	3,300
	Cash (4,000 - 700)		3,300

(b) Cate’s records

Date	Accounts	Debit	Credit
June 4	Accounts receivables - Willem Corporation	4,000
	Sales		4,000
June 4	Cost of goods sold	2,600
	Inventory		2,600
June 4	Sales returns and allowance	600
	Allowance for Sales returns and allowance		600
June 10	Allowance for Sales returns and allowance	600
	Sales returns and allowance	100
	Accounts receivables - Willem Corporation		700
June 10	Inventory	450
	Cost of goods sold		450
June 26	Cash (4,000 - 700)	3,300
	Accounts receivables - Willem Corporation		3,300