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 2/10, n/30, and that 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. Indicate the effect (direction and amount) of each
transaction on the Inventory balance of Readers’ Corner.
(Enter all amounts as positive values.)
2.2. Prepare the journal entries that Readers’
Corner would record and show any computations. (If no entry
is required for a transaction/event, select "No journal entry
required" in the first account field.)
Answer:
Cash discount received = ($550,000 - $10,000) * 2% = $10,800
Explanation:
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