Question

lated and purchase related transactions.

The following were selected from among the transactions completed by the Brown Company during

May of the current year: Prepare journal entries for the following transactions.

4 Sold merchandise on VISA, $120,000. The cost of merchandise sold was $75,000.

5 Purchased merchandise on account from Black Co., list price $70,000, trade

discount 40%, freight of $400, terms FOB shipping point, 2/10, n/eom.

12 Sold merchandise on account to Red Co., list price $15,000, terms 3/15, n/30.

The cost of merchandise sold $6,000.

13 Red returned $3,000 of merchandise from the May 12th transaction.

14 Paid Black on account, for purchase of May 5.

22 Sold merchandise on account to Yellow Co., $60,000. The cost of merchandise

sold was $35,000.

25 Received merchandise returned by Yellow co. from sale of May 22, $6,000. The

cost of the returned merchandise was $2,500.

28 Received cash on account from sale of May 12 to Red less the return of May13.

31 Paid VISA service fee of $3,000.

Part 2

What 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 buyer charge (debit) when she pays her own freight charges?

What account does the seller charge (debit) when she pays the buyer's freight?

Part 3

Use the information below to determine the number of units in ending inventory

and the ending inventory value using the perpetual inventory system for FIFO.

($)

Number Per

Date Transaction of units unit

Apr. 3 Inventory 30 800

8 Purchase 60 820

11 Sale 40 -

30 Sale 30 -

May 8 Purchase 60 850

10 Sale 20 -

19 Sale 15 -

28 Purchase 80 900

Part 4

There are 10 units in ending inventory compute the value of the ending inventory

using the periodic inventory method. Compute the answer using FIFO, LIFO and the average

cost methods. (round your answer to the nearest whole number)

Price Cost

Number Per Per

Date Transaction of units unit Purchase

Apr. 3 Inventory 2 10 20

8 Purchase 2 15 30

11 Purchase 3 20 60

30 Purchase 2 25 50

May 8 Purchase 3 25 75

10 Purchase 3 30 90

19 Purchase 3 30 90

28 Purchase 3 35 105

June 5 Purchase 3 40 120

16 Purchase 4 40 160

21 Purchase 4 45 180

28 Purchase 3 50 150

Answer 1

Answer-1:

General Journal Bridgeport’s Miniature Golf and Driving Range Inc.
Date	Account Titles	Debit	Credit
May.04	Cash	$       1,20,000
	Sales revenue		$       1,20,000
May.04	Cost of goods sold	75,000
	Merchandise inventory		75,000
May.05	Merchandise inventory (70,000 - 40%)	42,000
	Account payable		42,000
May.04	Merchandise inventory	400
	Cash		400
May.12	Account receivable	15,000
	Sales revenue		15,000
May.12	Cost of goods sold	6,000
	Merchandise inventory		6,000
May.13	Sales return and allowances	3,000
	Account receivable		3,000
May.13	Merchandise inventory (6,000/15,000*3,000)	1,200
	Cost of goods sold		1,200
May.14	Account payable	42,000
	Cash		41,160
	Merchandise inventory (42,000*2%)		840
May.22	Account receivable	60,000
	Sales revenue		60,000
May.22	Cost of goods sold	35,000
	Merchandise inventory		35,000
May.25	Sales return and allowances	6,000
	Account receivable		6,000
May.25	Merchandise inventory (6,000/15,000*3,000)	2,500
	Cost of goods sold		2,500
May.28	Cash	12,000
	Account receivable		12,000
May.31	VISA Service Fees	3,000
	Cash		3,000

Answer-2:

(i) Free On Board (FOB) is a shipment term used to indicate whether the seller or the buyer is liable for goods that are damaged or destroyed during shipping.

(ii) Types of FOB:- (1) FOB origin/shipping, (2) FOB destination

Under FOB origin/shipping, the buyer pays the cost of shipping and under FOB destination, the seller bears the cost of shipping.

(iii) The seller charge (debit) Freight Out account when she pays her own freight charges?

(iv) The buyer charge (debit), Merchandise Inventory account when she pays her own freight charges?

(v) The seller charge (debit), Account receivable account when she pays the buyer's freight?