Question

Roberts Company uses the gross method and a perpetual inventory system. Assuming the following entries, compute the amount that Roberts Company received on August 11.

August 1 Sold goods costing $3,000 to Hill Company on account, $5,000, terms 3/10, n/30. The goods are shipped FOB Shipping Point, Freight Prepaid by Seller, $320.
August 7 Hill Company returned undamaged merchandise previously purchased on account, $1,200.
August 11 Received the amount due from Hill Company.

Answer 1

August 1, sold goods on account terms 3/10, n/30

Dr Account receivable 5,000

Cr Sales revenue 5,000

Dr Cost of goods sold 3,000

Cr Merchandise inventory 3,000

Dr Accounts receivable (freight) 320

Cr Cash 320

When FOB shipping point is used, buyer pays the freight. When FOB destination is used, the seller pays the freight.

August 7, damaged merchandise returned

Dr Sales returns and allowances 1,200

Cr Accounts receivable 1,200

Dr Merchandise inventory 720 (approximately 60% since $3,000/$5,000)

Cr Cost of goods sold 720

August 11, invoice and freight charges collected

Dr Cash 4,006

Dr Sales discounts 114 (3% of $3,800)

Cr Accounts receivable 4,120 ($3,800 for the merchandise and $320 for the prepaid freight)