Question

wase and sales E5-7 The following merchandise transactions occurred in December. Both companies use a perpetual inventory syste calculate Dec. 3 Pictou Ltd. sold goods to Thames Corp. for $68,000, terms 2/10, n/30, FOB shipping point The inventory had cost Pictou $36,000. 7 Shipping costs of $900 were paid by the appropriate company. 8 Thames returned unwanted merchandise to Pictou. The returned merchandise has a sales price of $2,100, and a cost of $1,150. It was restored to inventory. 11 Pictou received the balance due from Thames. Instructions (a) Record the above transactions in the books of Pictou. (b) Record the above transactions in the books of Thames. (c) Calculate the gross profit earned by Pictou on the above transactions.

Answer 1

Thames corp. ( buyer )
Dec. 3	Merchandise inventory	68000
	Accounts payable		68000
Dec. 7	Merchandise inventory	900
	Cash		900
Dec. 8	Accounts payable	2100
	Merchandise inventory		2100
Dec.11	Accounts payable	65900
	Merchandise inventory		1318
	Cash		64582
	Discount is received since the payment is made within the discount period of 10 days.
	Freight cost and discount are adjusted in the
	Merchandise inventory account.
Pictou Ltd.( Seller )
Dec. 3	Accounts receivable	68000
	Sales revenue		68000
	COGS	36000
	Merchandise inventory		36000
Dec. 8	Sales return	2100
	Accounts receivable		2100
	Merchandise inventory	1150
	COGS		1150
Dec.11	Cash	64582
	Sales discount ( 65900 * 2 % )	1318
	Accounts receivable		65900	( 68000 - 2100 )
	GP earned
	Net Sales	64582		( 68000 - 2100-1318 )
	Less:- COGS	34850		( 36000 - 1150 )
	GP	29732