Question

i Requirements Prepare the journal entries for Canton Company for the sale of the merchandise, the cost of the sale, and the related receipt of payment from Spring Corporation. Assume that Spring Corporation takes the discount if payment is within the discount period. Indicate which company (Canton or Spring) owns the merchandise at the end of each of the following dates: a. April 3 b. April 4 c. April 10 (Assume that Canton Company uses the gross method of recording sales discounts.) Print | Done Done

Answer 1

Solution:

Requirement 1:

Journal Entry

Date	Accounts	Debit	Credit
Apr. 4	Account Receivable	$             10,000
	Sales Revenue		$             10,000
	(To record credit sales made)
Apr. 4	Cost Of Goods Sold	$               4,000
	Inventory		$               4,000
	( To record Cost of goods sold)

Notes:

1) Here we recorded sales as per gross method as asked in the question.

Requirement 2:

Date	Ownership	Explanation
April. 3	Canton Company	As per FOB Shipping point rules, ownership of goods goes to buyer as soon as goods left the seller place, On April 3rd goods are with Canton Company. So, Canton Company owns the merchandise
April. 4	Spring Corporation	As per FOB Shipping point rules, ownership of goods goes to buyer as soon as goods left the seller place, On April 4th goods left the Canton Company. So, Spring Corporation owns the merchandise
April. 10	Spring Corporation	As per FOB Shipping point rules, ownership of goods goes to buyer as soon as goods left the seller place, On April 10th goods reached Spring Corporation. So, Spring Corporation owns the merchandise