Reference no: EM132614208

Question - Merchandising Transactions

The following is a series of related transactions between Hip Pants and Sleek, a chain of retail clothing stores:

Oct. 12 Hip Pants sold Sleek 300 pairs of pants on account, terms 1/10, n/30. The cost of these pants to Hip Pants was $20 per pair, and the sales price was $60 per pair.

Oct. 15 Wings Express charged $50 for delivering this merchandise to Sleek. These charges were split evenly between the buyer and the seller, and were paid immediately in cash.

Oct. 16 Sleek returned 4 pairs of pants to Hip Pants because they were the wrong size. Hip Pants allowed Sleek full credit for this return.

Oct. 22 Sleek paid the remaining balance due to Hip Pants within the discount period.

Both companies use a perpetual inventory system.

Required -

a. Record this series of transactions in the general journal of Hip Pants. (The company records sales at gross sales price.)

b. Record this series transactions in the general journal of Sleek. (The company records purchases of merchandise at net cost and uses a Transportation-in account to record transportation charges on inbound shipments.)