Question

On June 10, Tamarisk, Inc. purchased $7,350 of merchandise on account from Culver Company, FOB shipping point, terms 3/10, n/30. Tamarisk, Inc. pays the freight costs of $500 on June 11. Goods totaling $650 are returned to Culver for credit on June 12. On June 19. Tamarisk, Inc. pays Culver Company in full, less the purchase discount. Both companies use a perpetual inventory system.

Answer 1

Journal entries for each transaction for Culver company:

Date	Account Titles and Explanation	Debit	Credit
June10	Accounts receivable	$7350
	Sales Revenue		$7350
	(To record sales on account)
	Cost of goods sold	$4700
	Merchandise inventory		$4700
	(To record the cost of merchandise sold)
June12	Sales Returns and allowances	$650
	Accounts Recievable		$650
	(To record the merchandise returned)
	Merchandise inventory	$257
	Cost if goods sold
	(To record cost of merchandise returned)
June19	Cash	$6499
	Sales Discount	$201
	Accounts Receivable		$6700
	(To record the payment received within discount period)

As on june19, payment has been recieved within the credit period of 10 days. Hence, the discount should be given to the Tamarisk inc.

*Amount of discount

= Net sales × discount rate

= (sales - sales returns) × discount rate

= ($7350 - $650) × 3%

= $6700 × 3%

= $201

*Cash received

= Net accounts reciveable - discount

= ($7350 - $650) - $201

= $6700 - $201

= $6499

______×_______

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