Question

Shore Co. sold merchandise to Blue Star Co. on account, $110,600, terms FOB shipping point, 2/10, n/30. The cost of the goods sold is $66,360. Shore paid freight of $2,000. Journalize Shore Co.'s entry for the sale, purchase, and payment of amount due, using the net method under a perpetual inventory system.

Answer 1

Account title and explanation	Debit	Credit
Accounts receivable [110,600 x .98]	$108,388
Sales revenue		$108,388
[To record sales revenue]
Cost of goods sold	$66,360
Merchandise inventory		$66,360
[To record cost of goods sold]
Accounts receivable	$2,000
Cash		$2,000
[To record freight payment]

Explanation for freight:

It terms FOB shipping point. It means buyer needs to pay freight. But seller paid for freight. So that freight amount to be recovered from buyer. Hence the entry for recovery is Debit to accounts receivable and credit to cash.