Question #5 Purchases, Sales 12 marks 18 minutes The following merchandise trans
ID: 2340619 • Letter: Q
Question
Question #5 Purchases, Sales 12 marks 18 minutes The following merchandise transactions occurred in December. Both companies use a perpetual nventory system. Pickles Ltd. sold goods to Tomato Corp. for $68,000, terms 2/10, n/30, FOB shipping point. The inventory had cost Pickles $36,000. Dec. 3 7 Shipping costs of $900 were paid by the appropriate company. R Tomato returned unwanted merchandise to Pickles. The returned merchandise has a 11 Pickles received the balance due from Tomato. sales price of $2,100, and a cost of $1,150. It was restored to inventory. Ins tructions (a) Record the above transactions in the books of Pickles. (5marks) (b) Record the above transactions in the books of Tomato. (4 marks) (c) Calculate the gross profit earned by Pickles on the above transactions. (1 mark)Explanation / Answer
Answer
Date
Requirement (a) In Books of Pickels
Requirement (b) In Books of Tomato
Accounts title
Debit
Credit
Accounts title
Debit
Credit
Dec-03
Accounts receivables
$ 68,000.00
Inventory
$ 68,000.00
Sales revenue
$ 68,000.00
Accounts payable
$ 68,000.00
(to record sales)
(to record purchases)
Dec-03
Cost of Goods Inventory
$ 36,000.00
[No entry to record Cost of Goods Sold]
Inventory
$ 36,000.00
(to record cost of the goods that were sold)
Dec-07
Inventory
$ 900.00
[No Entry for shipping cost, as it is paid by Pickels]
Cash
$ 900.00
(shipping cost paid)
Dec-08
Sales Return & Allowances
$ 2,100.00
Accounts payable
$ 2,100.00
Accounts receivables
$ 2,100.00
Inventory
$ 2,100.00
(to record return of Inventory)
(to record inventory returned)
Dec-08
Inventory
$ 1,150.00
[No entry to record Cost of Goods returned]
Cost of Goods Sold
$ 1,150.00
(to record cost of inventory returned)
Dec-11
Cash
$ 64,582.00 [65900 x 98%]
Accounts payable
$ 65,900.00
Sales Discount
$ 1,318.00 [65900 x 2%]
Inventory
$ 1,318.00
Accounts receivables
$ 65,900.00
Cash
$ 64,582.00
(to record receipt of payment)
(to record payment)
Sales revenue
$ 68,000.00
Less:
Sales return
$ 2,100.00
Sales Discount
$ 1,318.00
$ 3,418.00
Net Sales
$ 64,582.00
Cost of Goods Sold [36000 - 1150]
$ 34,850.00
Gross Profits
$ 29,732.00
Date
Requirement (a) In Books of Pickels
Requirement (b) In Books of Tomato
Accounts title
Debit
Credit
Accounts title
Debit
Credit
Dec-03
Accounts receivables
$ 68,000.00
Inventory
$ 68,000.00
Sales revenue
$ 68,000.00
Accounts payable
$ 68,000.00
(to record sales)
(to record purchases)
Dec-03
Cost of Goods Inventory
$ 36,000.00
[No entry to record Cost of Goods Sold]
Inventory
$ 36,000.00
(to record cost of the goods that were sold)
Dec-07
Inventory
$ 900.00
[No Entry for shipping cost, as it is paid by Pickels]
Cash
$ 900.00
(shipping cost paid)
Dec-08
Sales Return & Allowances
$ 2,100.00
Accounts payable
$ 2,100.00
Accounts receivables
$ 2,100.00
Inventory
$ 2,100.00
(to record return of Inventory)
(to record inventory returned)
Dec-08
Inventory
$ 1,150.00
[No entry to record Cost of Goods returned]
Cost of Goods Sold
$ 1,150.00
(to record cost of inventory returned)
Dec-11
Cash
$ 64,582.00 [65900 x 98%]
Accounts payable
$ 65,900.00
Sales Discount
$ 1,318.00 [65900 x 2%]
Inventory
$ 1,318.00
Accounts receivables
$ 65,900.00
Cash
$ 64,582.00
(to record receipt of payment)
(to record payment)