Question

Partners Wholesale has the following transactions during the month of May 2021:

May 1 Purchased inventory from Bob Inc. for $15,000, FOB destination,
terms 2/10 N/30.
May 2 The appropriate company paid $100 freight on the May 1 purchase.
May 6 Returned $3,000 worth of goods to Bob as they were the wrong colour.
May 7 Sold half of the remaining inventory purchased from Bob to Carol Inc.
for $10,000, FOB destination, terms 2/20 N/30.
May 8 The appropriate company paid $60 freight on the May 7 sale.
May 10 Paid Bob the entire amount owed to him.
May 12 Purchased inventory worth $8,000 from Ted Inc., FOB shipping point,
terms 3/15 N/45.
May 13 The appropriate company paid $40 freight on the May 12 purchase.
May 17 Sold half of the inventory purchased from Ted to Alice Ltd. For $8,000,
FOB shipping point, terms 1/10 N/20.
May 18 The appropriate company paid $50 freight on the May 17 sale.
May 22 Alice returned $1,000 worth of the goods she bought on May 17 as
you shipped her the wrong size.
May 25 Alice paid her outstanding balance.
May 30 Carol paid her outstanding balance.
May 31 Paid Ted the entire amount owed to him.
Record all of the transactions into the expanded accounting equation, with account names, and then answer the following questions

Answer 1

The student's question concerns the recording of transactions for Partners Wholesale into the expanded accounting equation. This equation reflects changes in assets, liabilities, and equity through purchases, sales, freight payments, returns, and receipt of payments.

Step-by-step explanation:

A student has inquired about recording a series of transactions for Partners Wholesale into the expanded accounting equation and has provided details of transactions within the month of May 2021. The details include purchasing inventory, freight payments, returns, sales, and receiving payments from customers. These transactions are essential to understand as they affect various parts of the expanded accounting equation, which includes Assets, Liabilities, and Equity, and potentially affect Revenue and Expenses as well.

Expanded Accounting Equation

In business accounting, the expanded accounting equation is represented as:

Assets = Liabilities + Owner's Equity + (Revenue - Expenses) - Draws

Each of these transactions will have an impact on the equation. For example:

Purchasing inventory on credit increases both Assets (Inventory) and Liabilities (Accounts Payable).

When inventory is sold, it decreases Inventory but increases Revenue, and if sold on credit, it also increases Accounts Receivable.

Freight payments reduce cash, thus decreasing Assets, but they could also be treated as Freight-In or Freight-Out expenses depending on the terms of delivery (FOB destination or FOB shipping point), which would increase Expenses.

Returns from customers decrease Revenue and Accounts Receivable (if sold on credit), while returns to vendors decrease Inventory and Accounts Payable.

For Partners Wholesale, each transaction will have to be recorded based on its nature, with attention to the terms provided, such as FOB destination or shipping point, which determines who is responsible for freight costs, and payment terms like 2/10 N/30, which may allow for discounts if invoices are paid early. Recording these transactions correctly is imperative to ensure accurate financial statements.