LO 6.1On March 1, Bates Board Shop sells 300 surfboards to a local lifeguard station at a sales price of $400 per board. The cost to Bates is $140 per board. The terms of the sale are 3/15, n/30, with an invoice date of March 1. Create the journal entries for Bates to recognize the following transactions.
- the initial sale
- the subsequent customer payment on March 10
LO 6.1Marx Corp. purchases 135 fax machines on credit from a manufacturer on April 7 at a price of $250 per machine. Terms of the purchase are 4/10, n/20 with an invoice date of April 7. Marx Corp pays in full for the fax machines on April 17. Create the journal entries for Marx Corp. to record:
- the initial purchase
- the subsequent payment on April 17
LO 6.1Match each of the following terms with the best corresponding definition.
| A. Sales allowance | i. A customer returns merchandise for a full refund |
| B. Purchase return | ii. A retailer receives a partial refund but keeps the defective merchandise |
| C. Sales discount | iii. A customer receives a partial refund but keeps the defective merchandise |
| D. Purchase discount | iv. A customer pays their account in full within the discount window |
| E. Sales return | v. A type of purchase discount negotiated between a manufacturer and a retailer before settlement on a final price |
| F. Trade discount | vi. A retailer returns merchandise for a full refund |
| G. Purchase allowance | vii. A retailer pays their account in full within the discount window |
LO 6.2The following is selected information from Mars Corp. Compute net purchases, and cost of goods sold for the month of March.
LO 6.2On April 5, a customer returns 20 bicycles with a sales price of $250 per bike to Barrio Bikes. Each bike cost Barrio Bikes $100. The customer had yet to pay on their account. The bikes are in sellable condition. Prepare the journal entry or entries to recognize this return if the company uses
- the perpetual inventory system
- the periodic inventory system
LO 6.3Record journal entries for the following purchase transactions of Flower Company.
| Oct. 13 | Purchased 85 bushels of flowers with cash for $1,300. |
| Oct. 20 | Purchased 240 bushels of flowers for $20 per bushel on credit. Terms of the purchase are 5/10, n/30, invoice dated October 20. |
| Oct. 30 | Paid account in full from the October 20 purchase. |
LO 6.3Record journal entries for the following purchase transactions of Apex Industries.
| Nov. 6 | Purchased 24 computers on credit for $560 per computer. Terms of the purchase are 4/10, n/60, invoice dated November 6. |
| Nov. 10 | Returned 5 defective computers for a full refund from the manufacturer. |
| Nov. 22 | Paid account in full from the November 6 purchase. |
LO 6.3Record the journal entry for each of the following transactions. Glow Industries purchases 750 strobe lights at $23 per light from a manufacturer on April 20. The terms of purchase are 10/15, n/40, invoice dated April 20. On April 22, Glow discovers 100 of the lights are the wrong model and is granted an allowance of $8 per light for the error. On April 30, Glow pays for the lights, less the allowance.
LO 6.4Record journal entries for the following sales transactions of Flower Company.
| Oct. 12 | Sold 25 bushels of flowers to a customer for $1,000 cash; cost of sale $700. |
| Oct. 21 | Sold 40 bushels of flowers for $30 per bushel on credit. Terms of the sale are 4/10, n/30, invoice dated October 21. Cost per bushel is $20 to Flower Company. |
| Oct. 31 | Received payment in full from the October 21 sale. |
LO 6.4Record the journal entries for the following sales transactions of Apache Industries.
| Nov. 7 | Sold 10 computers on credit for $870 per computer. Terms of the sale are 5/10, n/60, invoice dated November 7. The cost per computer to Apache is $560. |
| Nov. 14 | The customer returned 2 computers for a full refund from Apache. Apache returns the computers to their inventory at full cost of $560 per computer. |
| Nov. 21 | The customer paid their account in full from the November 7 sale. |
LO 6.4Record the journal entry or entries for each of the following sales transactions. Glow Industries sells 240 strobe lights at $40 per light to a customer on May 9. The cost to Glow is $23 per light. The terms of the sale are 5/15, n/40, invoice dated May 9. On May 13, the customer discovers 50 of the lights are the wrong color and are granted an allowance of $10 per light for the error. On May 21, the customer pays for the lights, less the allowance.
LO 6.5Review the following situations and record any necessary journal entries for Mequon’s Boutique.
| May 10 | Mequon’s Boutique purchases $2,400 worth of merchandise with cash from a manufacturer. Shipping charges are an extra $130 cash. Terms of the purchase are FOB Shipping Point. |
| May 14 | Mequon’s Boutique sells $3,000 worth of merchandise to a customer who pays with cash. The merchandise has a cost to Mequon’s of $1,750. Shipping charges are an extra $150 cash. Terms of the sale are FOB Shipping Point. |
LO 6.5Review the following situations and record any necessary journal entries for Letter Depot.
| Mar. 9 | Letter Depot purchases $11,420 worth of merchandise on credit from a manufacturer. Shipping charges are an extra $480 cash. Terms of the purchase are 2/10, n/40, FOB Destination, invoice dated March 9. |
| Mar. 20 | Letter Depot sells $7,530 worth of merchandise to a customer who pays on credit. The merchandise has a cost to Letter Depot of $2,860. Shipping charges are an extra $440 cash. Terms of the sale are 3/15, n/50, FOB Destination, invoice dated March 20. |
LO 6.5Review the following situations and record any necessary journal entries for Nine Lives Inc.
| Jan. 15 | Nine Lives Inc. purchases $8,770 worth of merchandise with cash from a manufacturer. Shipping charges are an extra $345 cash. Terms of the purchase are FOB Shipping Point. |
| Jan. 23 | Nine Lives Inc. sells $4,520 worth of merchandise to a customer who pays with cash. The merchandise has a cost to Nine Lives of $3,600. Shipping charges are an extra $190 cash. Terms of the sale are FOB Destination. |
LO 6.6The following select account data is taken from the records of Reese Industries for 2019.
- Use the data provided to compute net sales for 2019.
- Prepare a simple income statement for the year ended December 31, 2019.
- Compute the gross margin for 2019.
- Prepare a multi-step income statement for the year ended December 31, 2019.
LO 6.7Record journal entries for the following purchase transactions of Flower Company.
- On October 13, Flower Company purchased 85 bushels of flowers with cash for $1,300.
- On October 20, Flower Company purchased 240 bushels of flowers for $20 per bushel on credit. Terms of the purchase were 5/10, n/30, invoice dated October 20.
- On October 30, Flower Company paid its account in full for the October 20 purchase.
LO 6.7Record journal entries for the following purchase transactions of Apex Industries.
| Nov. 6 | Purchased 24 computers on credit for $560 per computer. Terms of the purchase are 4/10, n/60, invoice dated November 6. |
| Nov. 10 | Returned 5 defective computers for a full refund from the manufacturer. |
| Nov. 22 | Paid account in full from the November 6 purchase. |
LO 6.7Record the journal entries for the following sales transactions of Julian Sundries.
| Nov. 7 | Sold 10 tables on credit for $870 per table. Terms of the sale are 5/10, n/60, invoice dated November 7. The cost per table to Julian is $560. |
| Nov. 14 | The customer returned 2 slightly damaged tables for a full refund from Julian. |
| Nov. 21 | The customer paid their account in full from the November 7 sale. |
LO 6.7Record the journal entry or entries for each of the following sales transactions. Glow Industries sells 240 strobe lights at $40 per light to a customer on May 9. The cost to Glow is $23 per light. The terms of the sale are 5/15, n/40, invoice dated May 9. On May 13, the customer discovers 50 of the lights are the wrong color and are granted an allowance of $10 per light for the error. On May 21, the customer pays for the lights, less the allowance.