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Chapter 5: Q7SE (page 296)

On November 4, 2018, Cain Company sold merchandise inventory on account to Tarin Wholesalers, \(12,000, that cost \)4,800. Terms 3/10, n/30. On November 5, 2018, Tarin Wholesalers paid shipping of $30. Tarin Wholesalers paid the balance to Cain Company on November 13, 2018.

Requirements

1. Journalize Tarin Wholesaler鈥檚 November transactions.

2. Journalize Cain Company鈥檚 November transactions.

Short Answer

Expert verified

Answer

The total of debits and credits of Tarin Wholesaler is$24,030.

The total of debits and credits of Cain Company is$28,080.

Step by step solution

01

Meaning of Commercial Activities

In business terms, commercial activities refer to the events that are conducted for the exchange of goods or services in the market to makeeconomic benefits. Commercial activities must beethical and should not harm the environment, society, and the parties involved.

02

Preparation of journal entries for Tarin Wholesaler

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Nov 4

Merchandise Inventory

12,000

Accounts payable

12,000

(To record the purchase of inventories)

Nov 5

Merchandise Inventory

30

Cash

30

(To record the payment of shipping cost)

Nov 13

Accounts payable

12,000

Cash (12,000-360)

11,640

Merchandise inventory (12,000*3%)

360

(To record the payment)

03

Preparation of journal entries for Cain Company

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Nov 4

Accounts receivable (12,000-3%*12,000)

11,640

Sales revenue

11,640

(To record the sales on account)

Nov 4

Cost of goods sold

4,800

Merchandise inventory

4,800

(To record the cost of goods sold)

Nov 13

Cash

11,640

Accounts receivable

11,640

(To record the receipt of payment)

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Most popular questions from this chapter

Rae Philippe was a warehouse manager for Atkins Oilfield Supply, a business that operated across eight Western states. She was an old pro and had known most of the other warehouse managers for many years. Around December each year, auditors would come to do a physical count of the inventory at each warehouse. Recently, Rae鈥檚 brother started his own drilling company and persuaded Rae to 鈥渓oan鈥� him 80 joints of 5-inch drill pipe to use for his first well. He promised to have it back to Rae by December, but the well encountered problems and the pipe was still in the ground. Rae knew the auditors were on the way, so she called her friend Andy, who ran another Atkins warehouse. 鈥淪end me over 80 joints of 5-inch pipe tomorrow, and I鈥檒l get them back to you ASAP,鈥� said Rae. When the auditors came, all the pipe on the books was accounted for, and they filed a 鈥渘o-exception鈥� report.

Requirements

1. Is there anything the company or the auditors could do in the future to detect this kind of fraudulent practice?

2. How would this kind of action affect the financial performance of the company?

Describe FOB shipping point and FOB destination. When does the buyer take ownership of the goods, and who typically pays the freight?

When granting a sales allowance is there a return of merchandise inventory from the customer? Describe the journal entry(ies) that would be recorded.

Click Computers has the following transactions in July related to the purchase of merchandise inventory.

July 1 Purchase of \(20,500 worth of computers on account, terms of 2/10, n/30.

3 Return of \)4,000 of the computers to the vendor.

9 Payment made on the account.

Journalize the purchase transactions for Click Computers assuming the company uses the perpetual inventory system.

Is an adjusting entry needed for inventory shrinkage when using the periodic inventory system? Explain.
See all solutions

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