Question

The transactions listed below are typical of those involving New Books Inc. and Readersâ Corner. New Books is a wholesale merchandiser and Readersâ Corner is a retail merchandiser. Assume all sales of merchandise from New Books to Readersâ Corner are made with terms n/30, and the two companies use perpetual inventory systems. Assume the following transactions between the two companies occurred in the order listed during the year ended August 31.New Books sold merchandise to Readersâ Corner at a selling price of $630,000. The merchandise had cost New Books $447,000.Two days later, Readersâ Corner complained to New Books that some of the merchandise differed from what Readersâ Corner had ordered. New Books agreed to give an allowance of $11,500 to Readersâ Corner. Readersâ Corner also returned some books, which had cost New Books $3,600 and had been sold to Readersâ Corner for $5,100.Just three days later, Readersâ Corner paid New Books, which settled all amounts owed.Prepare the journal entries that Readersâ Corner would record. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Journal Entry (Readersa corner)

31 Aug Debit Inventory $630,000 Credit Accounts Payable $630,000

02 Sep Debit Accounts Payable $5,100 Credit Inventory $5,100

05 Sep Debit Accounts Payable $624,900 Credit Bank $624,900

Step-by-step explanation:

Readersa is a customer of New books therefore Readersa only records what happens to its entity and is not concerned with what the merchandise had cost New books prior selling it. The transaction is on credit hence creating Accounts Payable. The return of the merchandise decreases both the liability and the inventory.