Question

On June 10, Cullumber Company purchased $6,300 of merchandise on account from Whispering Winds Company, FOB shipping point, terms 1/10, n/30. Cullumber Company pays the freight costs of $410 on June 11. Damaged goods totaling $300 are returned to Whispering Winds for credit on June 12. The fair value of these goods is $70. On June 19, Cullumber Company pays Whispering Winds Company in full, less the purchase discount. Both companies use a perpetual inventory system. Prepare journal entries for both company separately.

Answer 1

The Journal entries are as follows:

(a) On June 10,

Account Receivables A/c Dr. $6,300

To sales $6,300

(To record sale of merchandise)

(b) On June 12,

(i) Sales Return & allowance A/c Dr. $300

To Account Receivables $300

(Being Merchandise return by customer)

(ii) Merchandise Inventory A/c Dr. $70

To Cost of goods sold $70

(To record cost of merchandise returned)

(c) On June 19,

Cash A/c Dr. 5,940

Sales discount A/c Dr. 60

To Account Receivable $6,000

(Being Amount actually received on Credit sale after allowing discount)