Question

Shore Co. sold merchandise to Blue Star Co. on account, $112,000, terms FOB shipping point, 2/10, n/30. The cost of the merchandise sold is $67,200. Shore Co. paid freight of $1,800.

Journalize Shore Co.'s entry for the sale, purchase, and payment of amount due.

Answer 1

See the journal entries below.

Step-by-step explanation:

a. Journal entry for the sale

Particulars Debit ($) Credit ($)

Accounts receivable - Blues Star 112,000

Sales revenue 112,000

(To record sales of merchandise inventory.)

Cost of goods sold 67,200

Merchandise inventory 67,200

(To record cost of goods sold.)

Accounts receivable – Blues Star 1,800

Cash 1,800

(To record freight paid.)

b. Journal entry for the purchase

Particulars Debit ($) Credit ($)

Merchandise inventory 67,200

Accounts payable 67,000

(To record the purchase of Merchandise inventory on account.)

c. Journal entry for the payment of amount due.

Particulars Debit ($) Credit ($)

Cash (w.2) 111,560

Discount allowed (w.1) 2,240

Accounts receivable (w.3) 113,800

(To record cash received from debtors.)

Accounts payable 67,200

Cash 67,200

(To record cash paid to the creditor.)

Workings:

w.1. Discount allowed = Sales revenue * 2% = $112,000 * 2% = $2,240

w.2. Cash = Sales revenue + Freight paid – discount allowed = $112,000 + $1,800 - $2,240 = $111,560

w.3. Accounts receivable = Sales revenue + Freight paid = $112,000 + $1,800 = $113,800