Question

Required information [The following information applies to the questions displayed below.] The transactions listed below are typical of those involving New Books Inc. and Readers' Corner. New Books is a wholesale merchandiser and Readers' Corner is a retail merchandiser. Assume all sales of merchandise from New Books to Readers' Corner are made with terms n/30, and the two companies use perpetual inventory systems. Assume the following transactions between the two companies occurred in the order listed during the year ended August 31. a. New Books sold merchandise to Readers' Corner at a selling price of $635,000. The merchandise had cost New Books $449,000. b. Two days later, Readers' Corner complained to New Books that some of the merchandise differed from what Readers' Corner had ordered. New Books agreed to give an allowance of $12,000 to Readers' Corner. Readers' Corner also returned some books, which had cost New Books $3,700 and had been sold to Readers' Corner for $5,200. C. Just three days later, Readers' Corner paid New Books, which settled all amounts owed.

Answer 1

		Debit	Credit
a(1)	Accounts Receivable	635000
	Sales revenue		635000
a(2)	Cost of goods sold	449000
	Inventory		449000
b(1)	Sales return and allowances	17200
	Accounts Receivable		17200
b(2)	Inventory	3700
	Cost of goods sold		3700
c	Cash	617800		=635000-17200
	Accounts Receivable		617800