The following selected transactions were completed during August between Summit Company and Beartooth Co.

The following selected transactions were completed during August between Summit Company and Beartooth Co.:

Aug.

 1. Summit Company sold merchandise on account to Beartooth Co., $48,000, terms FOB destination, 2/15, n/eom. The cost of the merchandise sold was $28,800.

  2. Summit Company paid freight of $1,150 for delivery of merchandise sold to Beartooth Co. on August 1.

  5. Summit Company sold merchandise on account to Beartooth Co., $66,000, terms FOB shipping point, n/45. The cost of the merchandise sold was $40,000.

  9. Beartooth Co. paid freight of $2,300 on August 5 purchase from Summit Company.

 15. Summit Company sold merchandise on account to Beartooth Co., $58,700, terms FOB shipping point, 1/10, n/30. Summit Company paid freight of $1,675, which was added to the invoice. The cost of the merchandise sold was $35,000.

 16. Beartooth Co. paid Summit Company for purchase of August 1.

 20. Summit Company paid Beartooth Co. a refund of $1,800 for defective merchandise in the August 1 purchase. Beartooth Co. agreed to keep the merchandise.

 25. Beartooth Co. paid Summit Company on account for purchase of August 15.

 31. Summit Company granted a customer allowance (credit memo) to Beartooth Co. for $6,000 (invoiced amount) for merchandise that was returned from the August 1 purchase. The cost of the merchandise returned was $3,200. 

Instructions

Journalize the August transactions for (1) Summit Company and (2) Beartooth Co.

Answer:

1.

 Aug. 1 Accounts Receivable—Beartooth Co. 47,040

Sales47,040

[$48,000 – ($48,000 × 2%)]

1 Cost of Merchandise Sold 28,800

Merchandise Inventory28,800

2 Delivery Expense1,150

Cash1,150

5 Accounts Receivable—Beartooth Co. 66,000

Sales66,000

5 Cost of Merchandise Sold 40,000

Merchandise Inventory40,000

15 Accounts Receivable—Beartooth Co. 58,113

Sales58,113

[$58,700 – ($58,700 × 1%)]

15 Accounts Receivable—Beartooth Co. 1,675

Cash1,675

15 Cost of Merchandise Sold 35,000

Merchandise Inventory35,000

16 Cash47,040

Accounts Receivable—Beartooth Co. 47,040

20 Customer Refunds Payable 1,800

Cash1,800

25 Cash ($58,113 + $1,675)59,788

Accounts Receivable—Beartooth Co. 59,788

31 Customer Refunds Payable

[$6,000 – ($6,000 × 2%)]5,880

Accounts Receivable—Beartooth Co. 5,880

31 Merchandise Inventory3,200

Estimated Returns Inventory3,200

2.

 Aug. 1 Merchandise Inventory47,040

Accounts Payable—Summit Company 47,040

5 Merchandise Inventory66,000

Accounts Payable—Summit Company 66,000

9 Merchandise Inventory2,300

Cash2,300

15 Merchandise Inventory59,788

Accounts Payable—Summit Company 59,788

{[$58,700 – ($58,700 × 1%)] + $1,675}

16 Accounts Payable—Summit Company 47,040

Cash47,040

20 Cash1,800

Merchandise Inventory1,800

25 Accounts Payable—Summit Company 59,788

Cash59,788

31 Accounts Payable—Summit Company 5,880

Merchandise Inventory 5,880

[$6,000 – ($6,000 × 2%)]