Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 5 Accounting for Merchandise Operations 229

Transaction

July 1. Scully Company
sold merchandise on
account to Burton Co.,
$7,500, terms FOB
shipping point, n/45. The
cost of the merchandise
sold was $4,500.

July 2. Burton Co. paid
transportation charges
of $150 on July 1
purchase from Scully
Company.

July 5. Scully Company
sold merchandise on
account to Burton Co.,
$5,000, terms FOB
destination, n/30. The
cost of the merchandise
sold was $3,500.

July 7. Scully Company
paid transportation costs
of $250 for delivery of
merchandise sold to
Burton Co. on July 5.

July 13. Scully Company
issued Burton Co. a
credit memorandum for
merchandise returned,
$1,000. The merchandise
had been purchased by
Burton Co. on account
on July 5. The cost of the
merchandise returned
was $700.

July 15. Scully Company
received payment from
Burton Co. for purchase
of July 5.

Scully Company (Seller)

Accounts Receivable—Burton Co. 7,500

Sales 7,500

Cost of Merchandise Sold 4,500

Merchandise Inventory 4,500

No entry.

Accounts Receivable—Burton Co. 5,000

Sales 5,000

Cost of Merchandise Sold 3,500

Merchandise Inventory 3,500

Transportation Out 250

Cash 250

Sales Returns & Allowances 1,000

Accounts Receivable—Burton Co. 1,000

Merchandise Inventory 700

Cost of Merchandise Sold 700

Cash 4,000

Accounts Receivable—Burton Co. 4,000

Burton Co. (Buyer)

Merchandise Inventory 7,500

Accounts Payable—Scully Co. 7,500

Merchandise Inventory 150

Cash 150

Merchandise Inventory 5,000

Accounts Payable—Scully Co. 5,000

No entry.

Accounts Payable—Scully Co. 1,000

Merchandise Inventory 1,000

Accounts Payable—Scully Co. 4,000

Cash 4,000

July 18. Scully Company
sold merchandise on
account to Burton Co.,
$12,000, terms FOB
shipping point, 2/10,
n/eom. Scully Company
prepaid transportation
costsof $500, which were
added to the invoice. The
cost of the merchandise
sold was $7,200.

July 28. Scully Company
received payment from
Burton Co. for purchase
of July 18, less discount
(2% $12,000).

Accounts Receivable—Burton Co. 12,000

Sales 12,000

Accounts Receivable—Burton Co. 500

Cash 500

Cost of Merchandise Sold 7,200

Merchandise Inventory 7,200

Cash 12,260

Sales Discounts 240

Accounts Receivable—Burton Co. 12,500

Merchandise Inventory 12,500

Accounts Payable—Scully Co. 12,500

Accounts Payable—Scully Co. 12,500

Merchandise Inventory 240

Cash 12,260