Prepare the journal entries that sports r us would record

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Reference no: EM13873031

The transactions listed below are typical of those involving Southern Sporting Goods and Sports R Us. Southern Sporting Goods is a wholesale merchandiser and Sports R Us is a retail merchandiser. Assume all sales of merchandise from Southern Sporting Goods to Sports R Us are made with terms 2/10, n/30, and that the two companies use perpetual inventory systems. Assume the following trans-actions between the two companies occurred in the order listed during the year ended December 31.

a. Southern Sporting Goods sold merchandise to Sports R Us at a selling price of $ 125,000. The merchandise had cost Southern Sporting Goods $ 94,000.

b. Two days later, Sports R Us complained to Southern Sporting Goods that some of the merchandise differed from what Sports R Us had ordered. Southern Sporting Goods agreed to give an allowance of $ 3,000 to Sports R Us.

c. Just three days later Sports R Us paid Southern Sporting Goods, which settled all amounts owed.

Required:

1. Indicate the effect (direction and amount) of each transaction on the Inventory balance of Sports R Us.

2. Prepare the journal entries that Sports R Us would record and show any computations.

Reference no: EM13873031

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