Question

NOO Mail Cengage Unlimited Student Dashboard CengageNOW12 Online teaching and learning resource from Ceng eBook Show Me How Calculator Printem Purchase-Related Transactions Showcase Co., a furniture wholesaler, sells merchandise to Balboa Co. on account, $34,500, terms 1/30. The cost of the merchandise sold is $20,700. Showcase Co. issues a credit memo for $6,200 for merchandise returned prior to Balboa Co. paying the original invoice. The cost of the merchandise returned is $3,700 a. Journalize Balboa Co's entry for the purchase Merchandise Inventory Accounts Payable-Showcase Co. 34.500 ✓ Feedback Check My Work a. Record the transaction from the buyer's perspective. A purchase increases inventory and the amount that is owed on account b. Journalize Balboa Co's entry for the return of the merchandise for credit. Accounts Payable-Showcase Co. 4.800 X Merchandise Inventory Ro Feedback Check My Work b. A return reduces Merchandise Inventory and Accounts Payable in the buyer's records Check My Work < Previous Next > All work saved Email Instructor Save and Exit Submit Assignment for Grading

Answer 1

The amount should be 6,200 (both debit as well as credit) since the credit memo would include the profit component.

Also the cost of merchandise for this particular transaction is of no relevance since all entries have to be made against bills, invoices or memos exchanged. Invoice in case of the first entry and credit memo in case of the second entry.