Question

Question 5 Presented below are selected transactions for Blue Spruce Company during September and October of the current year. Blue Spruce uses a perpetual inventory system. Sept. 1 Purchased merchandise on account from Hillary Company at a cost of $46,000, FOB destination, terms 1/15, n/30. 2 The correct company paid $2,000 of freight charges to Trucking Company on the September 1 merchandise purchase. 5 Returned for credit $3,400 of damaged goods purchased from Hillary Company on September 1. 15 Sold the remaining merchandise purchased from Hillary Company to Irvine Company for $70,000, terms 2/10, n/30, FOB destination. 16 The correct company paid $2,100 of freight charges on the September 15 sale of merchandise. 17 Issued Irvine Company a credit of $5,700 for returned goods. These goods had cost Blue Spruce Company $3,400 and were returned to inventory. 25 Received the balance owing from Irvine Company for the September 15 sale. 30 Paid Hillary Company the balance owing for the September 1 purchase. Oct. 1 Purchased merchandise on account from Kimmel Company at a cost of $58,000, terms 2/10, n/30, FOB shipping point. 2 The correct company paid freight costs of $1,100 on the October 1 purchase. 3 Obtained a purchase allowance of $3,000 from Kimmel Company to compensate for some minor damage to goods purchased on October 1. 10 Paid Kimmel Company the amount owing on the October 1 purchase. 11 Sold all of the merchandise purchased from Kimmel Company to Kieso Company for $88,000, terms 2/10, n/30, FOB shipping point. 12 The correct company paid $800 freight costs on the October 11 sale. 17 Issued Kieso Company a sales allowance of $2,300 because some of the goods did not meet Kieso's exact specifications. 31 Received a cheque from Kieso Company for the balance owing on the October 11 sale.

Answer 1

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Date	Account	Debit	Credit
Sep 1	Inventory	$   46,000
	Accounts Payable-Hillary		$   46,000
	(To record purchases)
Sep 2	No entry in Blue Spruce books as freight paid by Hillary
Sep 5	Accounts Payable-Hillary	$     3,400
	Inventory		$     3,400
Sep 15	Accounts Receivable	$   70,000
	Sale		$   70,000
	(To record sale)
	Cost of goods sold	$   42,600
	Inventory		$   42,600
	(To record cost of goods sold)
Sep 16	Freight outward Expense	$     2,100
	Cash		$     2,100
	(To record freight expense as sale of FOB destination)
Sep 17	Sales return and allowance	$     5,700
	Accounts Receivable		$     5,700
	(To record sale return)
	Inventory	$     3,400
	Cost of goods sold		$     3,400
	(To record cost of goods returned)
Sep 25	Cash	$   63,014
	Sales discount ($64,300*2%)	$     1,286
	Accounts Receivable ($70,000-$5,700)		$   64,300
	(To record amount received)
Sep 30	Accounts Payable-Hillary ($46,000-$3,400)	$   42,600
	Cash		$   42,600
	(To record cash payment)
Oct 1	Inventory	$   58,000
	Accounts Payable-Kimmel		$   58,000
	(To record purchases)
Oct 2	Inventory	$     1,100
	Cash		$     1,100
	(To record freight expense paid)
Oct 3	Accounts Payable-Kimmel	$     3,000
	Inventory		$     3,000
Oct 10	Accounts Payable-Kimmel ($58,000-$3,000)	$   55,000
	Inventory ($55,000*2%)		$     1,100
	Cash		$   53,900
	(To record cash payment)
Oct 11	Accounts Receivable	$   88,000
	Sale		$   88,000
	(To record sale)
	Cost of goods sold	$   55,000
	Inventory		$   55,000
	(To record cost of goods sold)
Oct 12	No entry as freight paid by purchaser
Oct 17	Sales return and allowance	$     2,300
	Accounts Receivable		$     2,300
	(To record sale Allowance)
Oct 31	Cash	$   85,700
	Accounts Receivable ($88,000-$2,300)		$   85,700
	(To record amount received)