Answer to Question #195957 in Accounting for zohaib

Question

Mars Musical Instrument Company and Tiger Company engaged in the following transactions with each other during July:July 2 Mars Musical Instrument Company purchased merchandise on account with a list price of $48,000 from Tiger Company. The terms were 3/EOM, n/60, FOB shipping point. The original cost to Tiger Company was $30,000.

5 The buyer paid the freight bill on the purchase of July 2, $1,104.

6 The buyer returned damaged merchandise with an invoice price of $2,790 to the seller and received full credit. The original cost of the returned merchandise to Tiger Company was $1,700.

On the last day of the discount period, the buyer paid the seller for the merchandise.

Prepare all the necessary journal entries for the buyer and the seller using perpetual inventory method.

Answer 1

In books of Buyer or Mars musical instrument company :

Date Account Title Debit Credit

July 2 Merchandise Inventory 48,000

Account payable 48,000

July 5 Merchandise inventory 1,104

Cash 1,104

July 6 Account Payable 2,790

Merchandise Inventory 2,790

July 31 Account Payable (48,000 - 2790) 45,210

Merchandise Inventory (45,210 $\times$ 0.03) 1356

Cash 43,854

In the books of seller or Tiger company:

Date Account Title Debit Credit

July 2 Account Receivables 48,000

Sales Revenues 48,000

July 5 No entry in the books of seller as

as paid by buyer

July 6 Sales Returns & Allowances 2,790

Accounts Receivables 2,790

July 31 Cash 43,854

Sales Discount 1,356

Account Receivables 42,498