Answer to Question #216322 in Accounting for zuby

Question

a. Silver Company purchased USD 56,000 of merchandise from Milton Company on account.

Before paying its account, Silver Company returned damaged merchandise with an invoice price of USD 11,680.

Assuming use of periodic inventory procedure, prepare entries on both companies' books to record both the

purchase/sale and the return.

b. Show how any of the required entries would change assuming that Milton Company granted an allowance of

USD 3,360 on the damaged goods instead of giving permission to return the merchandise

Answer 1

A. In the books of Milton comp

Journal Entry

Silver Company A/C Dr $11680

To Silver Company.   $11680

(Being sales return recorded)

B. In the books of Silver Company Journal Entry

Purchase A/c Dr $56000

To Milton Company  $56000

(Being purchase of merchandise)

Milton Company A/c Dr 11680

To purchase return  $11680

(Being purchase return recorded)

1=Milton Company granted an allowance of $3360

   In the books of Milton Company Journal

Silver Company A/c.  Dr $56000

To sales     $56000

Sales return and allowance A/c Dr $3360

To Cash        $3360