Question

Received a $27,000 6-month, 6% note on a loan Boomer made to Cowboys, Inc. January 5 Purchased 4,200 units of inventory on account for $546,000 ($130 each) with terms 1/10, n/30. January 8 Returned 120 defective units of inventory purchased on January 5. January 15 Sold 4,000 units of inventory on account for $600,000 ($150 each) with terms 2/10, n/30. Record 2 entries for this transaction. January 17 Customers returned 200 units sold on January 15. These units were originally purchased by Boomer on January 5. The units were placed in inventory to be sold in the future. Record 2 entries for this transaction. January 20 Received cash from customers on accounts receivable. This amount includes $43,000 from 2020 plus amount receivable on sale of 3,400 units sold on January 15. January 21 Wrote off remaining accounts receivable from 2020.

Answer 1

Finall Answer:

1. Record the sale of inventory on account on January 15 and subsequent return on January 17.

2. Recognize the cash received from customers on accounts receivable on January 20, including amounts from prior periods.

Step-by-step explanation:

On January 15, the company sold 4,000 units of inventory on account for $600,000. This transaction involves recognizing the revenue from the sale of inventory. However, on January 17, 200 units were returned by customers. These returned units were part of the inventory sold on January 15. This return transaction must be accounted for separately, reducing the previous sales revenue and returning the inventory to the stock for future sales.

Answer 2

The transaction involves the purchase of inventory on account with specified terms. Entries need to be made to record the transaction accurately.

Step-by-step explanation:

The transaction mentioned in the question involves the purchase of inventory on account. On January 5, Cowboys, Inc. purchased 4,200 units of inventory from Boomer for $546,000. The terms of the purchase were 1/10, n/30, meaning that if the buyer paid within 10 days they would receive a 1% discount, otherwise full payment was required within 30 days.

To record this transaction, Cowboys, Inc. would make the following entries:

Debit Inventory for $546,000 and Credit Accounts Payable for $546,000

If the payment is made within 10 days, Cowboys, Inc. would make an additional entry to record the discount. They would Debit Accounts Payable for the discounted amount and Credit Cash for the discounted amount.