Question

Part 1Sales related and purchase related transactions. The following were selected from among the transactions completed by the Brown Company duringMay of the current year: Prepare journal entries for the following transactions.4Sold merchandise for cash, $120,000. The cost of merchandise sold was $95,000.5Purchased merchandise on account from Black Co., list price $70,000, tradediscount 50%, freight of $600, terms FOB shipping point, 2/10, n/eom.12Sold merchandise on account to Red Co., list price $15,000, terms 2/15, n/30.The cost of merchandise sold $6,000.13Red returned $1,000 of merchandise from the May 12th transaction.14Paid Black on account, for purchase of May 5.22Sold merchandise on account to Yellow Co., $70,000. The cost of merchandisesold was $35,000.25Received merchandise returned by Yellow co. from sale of May 22, $10,000. The cost of the returned merchandise was $4,500.28Received cash on account from sale of May 12 to Red less the return of May13.31Paid VISA service fee of $3,000.Part 2What does FOB mean?What are the two types of FOB, and who pays under each method?What account does the seller charge (debit) when she pays her own freight charges?What account does the seller charge (debit) when she pays the buyer's freight?What account does the buyer charge (debit) when she pays her own freight charges?Part 3 Use the information below to determine the number of units in ending inventoryand the ending inventory value using the perpetual inventory system for FIFO.($) Number PerDateTransactionof unitsunitApr. 3Inventory30600 8Purchase 60700 11Sale50- 15Purchased30710 20Purchased40715 25Sale80 30Sale30- May 8Purchase 60720 10Sale20- 19Sale15- 28Purchase 80730 Part 4There are 9 units in ending inventory compute the value of the ending inventoryusing the periodic inventory method. Compute the answer using FIFO, LIFO and the averagecost methods. (round your answer to the nearest whole number)Price CostNumber PerPerDateTransactionof unitsunitPurchaseApr. 3Inventory210 208Purchase 3154511Purchase 3206030Purchase 22550 May 8Purchase 3257510Purchase 3309019Purchase 3309028Purchase 335105 June 5Purchase 34012016Purchase 44016021Purchase44518028Purchase 350150

Answer 1

Part 2.

FOB is a abbreviated form of FREE ON BOARD it is contract entered at the time of sale of goods between buyer and seller that who has to take risk on damage of goods in transit.

Types of FOB

FOB Origin means the risk is taken by the buyer as and when goods are shipped from seller point.

FOB destination means the risk is beared by seller till the goods are shipped to buyer premises.

When seller pays her frieght charges it will be charged to selling and distribution expenses.

When seller pays buyer frieght it will charged to buyer account.

When buyer pays her own frieght charges it will be charged to frieght inwards.