Question

Torres Company uses the gross method and a perpetual inventory system. Assuming the following entries, compute the amount that Torres Company received on May 12.

a. May 1 Sold goods costing $3,000 to Campbell Company on account, $5,000, terms 1/10, n/30. The goods are shipped FOB Shipping Point, Freight Prepaid by Seller, $110.
b. May 7 Campbell Company returned undamaged merchandise previously purchased on account, $200.
c. May 12 Received the amount due from Campbell Company.

Answer 1

Torres Company received $4,800 on May 12.

Step-by-step explanation:

When The Sale was made, the following entries apply :

J1

Trade Receivable $5,000 (debit)

Sales Revenue $5,000 (credit)

J2

Cost of Sales $3,000 (debit)

Merchandise $3,000 (credit)

J3

Freight Expenses $110 (debit)

Cash $110 (credit)

When Campbell Company returned Merchandise :

J1

Sales Revenue $200 (debit)

Trade Receivable $200 (credit)

When Campbell Company pays for the goods

The payment is made 2 days out of the discount period, therefore not eligible for discount.

Settle amount in full less Return Allowance of $200

Trade Receivable $4,800 (debit)

Cash $4,800 (credit)

Conclusion :

Torres Company received $4,800 on May 12.