199. VincentCompany, Inc. purchased merchandise from Liu Company with an invoice price of $300,000 and credit terms of 2/10, n/30. Liu Company’s cost for the merchandise was $200,000. Vincent Company, Inc. paid within the discount period. Assume that both buyer and seller use a inventory system.1. Prepare entries that Vincent should record for (a) the purchaseand (b) the cash payment.2. Prepare entries that Liu should record for (a) the sale and (b) the cash collection.3. Assume that the buyer borrowed enough cash to pay the balance on the last day of the discount period at an annual interest rate of 9% and paid it back on the last day of the credit period. Compute how much the buyer saved by following this strategy. (Assume a 365-day year and round dollar amounts to the nearest cent.)
200. Prepare journal entries to record the following merchandise transactions of Martinez Excavation Equipment, Inc., which applies the inventory system.
May 1
Purchased merchandise from KonaCompany for $12,700 under credit terms of 2/15, n/45, FOB destination, and invoice dated May 1.
3
Sold merchandise to Waltonfor $8,000 under credit terms of 1/10, n/30, FOB destination, invoice date May 3. The merchandise had cost $5,000.
5
Paid $350 cash for shipping charges related to the May 3 sale.
6
Returned $2,000 of the merchandise purchased on May 1 to KonaCompany.
7
Waltonreturned merchandise from the May 3 sale that had cost Martinez$625 and had been sold for $1,000. The merchandise was restored to inventory.
13
Received the balance due from Waltonless the return.
14
Paid the amount due KonaCompany.
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