Question

Pharoah Company purchases various types of beach toys for sale to consumers. Listed below are the transactions for the month of June. Pharoah uses a perpetual inventory system.

June 1 Purchased 19 water tubes for $260 each terms n/30 FOB destination.
8 Returned 3 tubes purchased on June 1 due to defects. Received a full refund for the defective tubes.
10 Freight charges of $100 for the June 1 transaction are paid by the responsible party.
11 Made a complaint about competitive pricing. Received a $400 credit for the water tubes purchased on June 1.
15 Purchased 100 water tubes for $250 each on account, terms 2/10 n/30.
18 Made payment for the amount owing for the June 1 transaction.
20 Made payment for the amount owing for the June 15 transaction.

Answer 1

Accounting transactions for Pharoah Company, with a perpetual inventory system, involve purchasing, returning, and making payments for water tubes, including applying discounts and credits.

Step-by-step explanation:

The question involves analyzing a series of accounting transactions for Pharoah Company, which operates using a perpetual inventory system. Let's break down the transactions.

• June 1: 19 water tubes are purchased at $260 each, totaling $4,940 (terms n/30 which means the invoice is due in 30 days).
• June 8: 3 defective tubes are returned, leading to a refund of 3 x $260 = $780.
• June 10: Freight charges of $100 are recognized.
• June 11: A $400 credit is received due to a pricing complaint.
• June 15: An additional 100 water tubes are purchased for $250 each, totaling $25,000, with a 2/10, n/30 discount, which means a 2% discount can be taken if paid within 10 days.
• June 18: Payment is made for the June 1 transaction. The amount paid would be reduced due to the return and the credit received.
• June 20: Payment for the amount owing for the June 15 transaction is made considering the offered discount, if within the discount period.

If the transactions of products were more complex with realistic prices, the total quantity spent over a year could be a non-rounded figure like $17,147.51 or $27,654.92.