Question

The following transactions occurred between the Seinfeld Company and Simpson Stores during March of the current year.

Mar. 8 Seinfeld sold $2,600 worth of merchandise to Simpson Stores, terms 2/10, n/30, F.O.B. shipping point. Seinfeld paid freight charges of $40 and added it to the amount of the invoice for the merchandise.

Mar. 12 Simpson Stores returned $200 worth of the merchandise shipped on March 8. Seinfeld issued a credit memo for this amount.

Mar. 17 Seinfeld received full payment for the net amount due from the March 8 sale.

Mar. 20 Simpson Stores returned goods that had been billed originally at $100. Seinfeld issued a cheque.

REQUIRED

Record the above transactions in general journal form as they would appear on

a) the books of Seinfeld Company and
b) the books of Simpson Stores.
Simpson Stores records purchases at invoice price.

Answer 1

a) Journal entry in the books of Seinfeld Company:

Post Ref. Debit (S) Credit (S) 2,640 2,600 40 200 200 Date Accounts and Explanation Mar. 8 Account receivable Sales revenue Cash (to record the sales on account) Mar. 12 Sales returns and allowances Acccounts receivable (to record the receipt against receivables) Mar. 17 Cash (2440-48.80) Sales Discount (2640-200)*2%) Acccounts receivable (2640-200) (to record the receipt against receivables) Mar. 20 Sales returns and allowances Cash (100-98) Sales Discount (100*2%) (to record the payment to simpson stores for returns) 2,391.20 48.80 2,440 100 98

b) Journal entries in the books of Simpson Stores:

Date Accounts and Explanation Post Ref. Debit ($) Credit (S) 2,600 40 2,640 200 200 Mar. 8 Purchases Transportation-in Accounts payable (to record the purchase on credit) Mar. 12 Accounts payable Purchase returns and allowances (to record the credit memo for returned goods) Mar. 17 Accounts payable (2640-200) Cash (2440-48.80) Purchase Discount (2640- 200)*2%) 2,440.00 2.391.20 48.80 98 (to record the payment to seinfeld co.) Mar. 20 Cash (100-2) Purchase Discount (100*2%) Purchase returns and allowances (to record the cheque received for purchase return) 2 100