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The following transactions are for Blossom Company.

1. On December 3, Blossom Company sold $400,000 of merchandise to Crane Co. on account. The cost of the merchandise sold was $264,000.
2. On December 8, Crane Co. returned $20,000 of merchandise purchased on December 3. The cost of the goods was $12,800.
3. On December 13, Blossom Company received the balance due from Crane Co.

1 Answer

6 votes

Blossom Company sold $400,000 of merchandise, returned $20,000, and received a $380,000 payment from Crane Co.

How is that so?

Summary of Effects

  • Sales Revenue: Increased by $400,000 and therefore decreased by $20,000 on account of the return, resulting in a net increase of $380,000.
  • Cost of Goods Sold out: Increased by $264,000 and before decreased by $12,800 due to the return, happening in a net increase of $251,200.
  • Gross Profit: $380,000 (Transactions Revenue) - $251,200 (Cost of Goods Convinced) = $128,800.
  • Accounts Due: Increased to $400,000 after the auction, decreased to $380,000 following in position or time the return, and finally settled to $0 following in position or time receiving fee.
  • Inventory: Decreased by $264,000 on account of the initial selling and increased by $12,800 due to the return.

Complete question below:

The following transactions are for Blossom Company.

1. On December 3, Blossom Company sold $400,000 of merchandise to Crane Co. on account. The cost of the merchandise sold was $264,000.

2. On December 8, Crane Co. returned $20,000 of merchandise purchased on December 3. The cost of the goods was $12,800.

3. On December 13, Blossom Company received the balance due from Crane Co.

What are the effects of the transactions?

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