Question

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

Aug.	1	Summit Co. sold merchandise on account to Beartooth Co., $47,600, terms FOB destination, 2/15, n/eom. The cost of the merchandise sold was $27,760.
	2	Summit Co. paid freight of $1,265 for delivery of merchandise sold to Beartooth Co. on August 1.
	5	Summit Co. sold merchandise on account to Beartooth Co., $63,980, terms FOB shipping point, n/eom. The cost of the merchandise sold was $43,180.
	9	Beartooth Co. paid freight of $2,450 on August 5 purchase from Summit Company.
	15	Summit Co. sold merchandise on account to Beartooth Co., $60,300, terms FOB shipping point, 1/10, n/30. Summit Company paid freight of $1,725, which was added to the invoice. The cost of the merchandise sold was $34,360.
	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.

Required:

Journalize the August transactions for (1) Summit Co. and (2) Beartooth Co. Refer to the Chart of Accounts of the appropriate company for exact wording of account titles.

JOURNAL

(1) Journalize the August transactions for Summit Co.. Refer to the Chart of Accounts of the appropriate company for exact wording of account titles.

PAGE 10

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26

(2) Journalize the August transactions for Beartooth Co. Refer to the Chart of Accounts of the appropriate company for exact wording of account titles.

PAGE 15

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

Answer 1

Summit Co.

Date	Account title and Explanation	Debit	Credit
Aug.1	Accounts receivable-Beartooth Co.	$47,600
	Sales revenue		$47,600
	[To record credit sales]
	Cost of goods sold	$27,760
	Inventory		$27,760
	[To record cost of goods sold]
Aug.2	Delivery expense	$1,265
	Cash		$1,265
	[To record payment of freight]
Aug.5	Accounts receivable-Beartooth Co.	$63,980
	Sales revenue		$63,980
	[To record credit sales]
	Cost of goods sold	$43,180
	Inventory		$43,180
	[To record cost of goods sold]
Aug.9	No entry
Aug.15	Accounts receivable-Beartooth Co. [60300+1725 freight]	$62,025
	Sales revenue		$60,300
	Cash		$1,725
	[To record credit sales and payment of freight on behalf of Beartooth]]
	Cost of goods sold	$34,360
	Inventory		$34,360
	[To record cost of goods sold]
Aug.16	Cash	$46,648
	Sales discount [47600 x 2%]	$952
	Accounts receivable-Beartooth Co.		$47,600
	[To record collections from customers]
Aug.20	Sales returns and allowance	$1,800
	Cash		$1,800
	[To record refund given for defective merchandise]
Aug.25	Cash	$61,422
	Sales discount [60300 x 1%]	$603
	Accounts receivable-Beartooth Co.		$62,025
	[To record collections from customers]
Aug.31	Sales returns and allowance	$6,000
	Accounts receivable-Beartooth Co.		$6,000
	[To record sales returns]

Beartooth Co.

Date	Account title and Explanation	Debit	Credit
Aug.1	Inventory	$47,600
	Accounts payable-Summit Co.		$47,600
	[To record purchase of inventory on account]
Aug.2	No Entry
Aug.5	Inventory	$63,980
	Accounts payable-Summit Co.		$63,980
	[To record purchase of inventory on account]
Aug.9	Inventory	$2,450
	Cash		$2,450
	[To record payment of freight]
Aug.15	Inventory [60300+1725]	$62,025
	Accounts payable-Summit Co.		$62,025
	[To record purchase of inventory on account]
Aug.16	Accounts payable-Summit Co.	$47,600
	Inventory [47600 x 2%]		$952
	Cash		$46,648
	[To record cash paid for accounts payable]
Aug.20	Cash	$1,800
	Inventory		$1,800
	[To record refund from seller for defective merchandise]
Aug.25	Accounts payable-Summit Co. [60300+1725]	$62,025
	Inventory [60,300 x 1%]		$603
	Cash		$61,422
	[To record cash paid for accounts payable]
Aug.31	Accounts payable-Summit Co.	$6,000
	Inventory		$6,000
	[To record purchase returns]