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Preparing journal entries for merchandising activities

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Reference no: EM131813313

Problem - Preparing journal entries for merchandising activities-perpetual system

Aug. 1 Purchased merchandise from Arotek Company for $7,300 under credit terms of 1/10, n/30, FOB destination, invoice dated August 1.

Aug. 4 At Arotek's request, Sheng paid $270 cash for freight charges on the August 1 purchase, reducing the amount owed to Arotek.

Aug. 5 Sold merchandise to Laird Corp. for $5,110 under credit terms of 2/10, n/60, FOB destination, invoice dated August 5. The merchandise had cost $3,649.

Aug. 8 Purchased merchandise from Waters Corporation for $6,600 under credit terms of 1/10, n/45, FOB shipping point, invoice dated August 8. The invoice showed that at Sheng's request, Waters paid the $240 shipping charges and added that amount to the bill. (Hint: Discounts are not applied to freight and shipping charges.)

Aug. 9 Paid $110 cash for shipping charges related to the August 5 sale to Lux Corp.

Aug. 10 Laird returned merchandise from the August 5 sale that had cost Sheng $608 and been sold for $852. The merchandise was restored to inventory.

Aug. 12 After negotiations with Waters Corporation concerning problems with the merchandise purchased on August 8, Sheng received a credit memorandum from Waters granting a price reduction of $997.

Aug. 15 Received balance due from Laird Corp. for the August 5 sale less the return on August 10.

Aug. 18 Paid the amount due to Waters Corporation for the August 8 purchase less the price reduction granted.

Aug. 19 Sold merchandise to Tux Co. for $4,380 under credit terms of 1/10, n/30, FOB shipping point, invoice dated August 19. The merchandise had cost $3,040.

Aug. 22 Tux requested a price reduction on the August 19 sale because the merchandise did not meet specifications. Sheng sent Tux a $730 credit memorandum to resolve the issue.

Aug. 29 Received Tux's cash payment for the amount due from the August 19 sale.

Aug. 30 Paid Arotek Company the amount due from the August 1 purchase.

Required - Prepare journal entries to record the above merchandising transactions of Sheng Company, which applies the perpetual inventory system.

Reference no: EM131813313

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