Question

The following selected transactions were completed during August between Summit Company and Beartooth Co.: Aug. 1 2 5 Summit Company sold merchandise on account to Beartooth Co., $48,000, terms FOB destination, 2/15, n/eom. The cost of the goods sold was $28,800. Summit Company paid freight of $1,150 for delivery of merchandise sold to Beartooth Co. on August 1. Summit Company sold merchandise on account to Beartooth Co., $66,000, terms FOB shipping point, n/eom. The cost of the goods sold was $40,000. Beartooth Co. paid freight of $2,300 on August 5 purchase from Summit Company. Summit Company sold merchandise on account to Beartooth Co., $58,700, terms FOB shipping point, n/45. Summit paid freight of $1,675, which was added to the invoice. The cost of the goods sold was $35,000 Beartooth Co. paid Summit Company for purchase of August 1. 15 20 Summit Company paid Beartooth Co. a cash refund of $1,000 for defective merchandise purchased on August 1. Beartooth Co. kept the merchandise. 31 31 Beartooth Co. paid Summit Company on account for purchase of August 5. Summit Company issued Beartooth Co. a credit memo for merchandise with an invoice amount of $4,000 that was returned from the August 15 sale. The cost of the merchandise returned was $2,500. Journalize the entries to record the transactions for (1) Summit Company and (2) Beartooth Co., assuming that both companies use the periodic inventory system. Refer to the Chart of Accounts of the appropriate company for exact wording of account titles.

Answer 1

1.

	Summit Company
Date	Account Titles	Debit	Credit	Assets	Liabilities	Equity
Aug-01	Accounts Receivable	$      48,000		I
	Sales Revenue		$         48,000			I
	(Sales made on account)
Aug-02	Delivery Expense	$         1,150				D
	Cash		$           1,150	D
	(Payment of freight on sale)
Aug-05	Accounts Receivable	$      66,000		I
	Sales Revenue		$         66,000			I
	(Sales made on account)
Aug-09	No entry
Aug-15	Accounts Receivable	$      60,375		I
	Sales Revenue		$         58,700			I
	Cash		$           1,675	D
	(Sales made on account and freight paid)
Aug-16	Cash	$      47,040		I
	Sales Discount	$            960				D
	Accounts Receivable		$         48,000	D
	(Cash collected after 2% discount)
Aug-20	Sales returns and allowances	$         1,000				D
	Cash		$           1,000	D
	(Refund made for defective products)
Aug-31	Cash	$      66,000		I
	Accounts Receivable		$         66,000	D
	(Cash collected)
Aug-31	Sales returns and allowances	$         4,000				I
	Accounts Receivable		$           4,000	D
	(Sales return)

2.

	Beartooth Company
Date	Account Titles	Debit	Credit	Assets	Liabilities	Equity
Aug-01	Purchase	$      48,000				D
	Accounts Payable		$         48,000		I
	(Purchase made on account)
Aug-02	Freight in	$         1,150				D
	Cash		$           1,150	D
	(Payment of freight on purchase)
Aug-05	Purchase	$      66,000				D
	Accounts Payable		$         66,000		I
	(Purchase made on account)
Aug-09	Freight in	$         2,300				D
	Cash		$           2,300	D
	(Payment of freight on purchase)
Aug-15	Purchase	$      58,700				D
	Freight In	$         1,675				D
	Accounts Payable		$         60,375		I
	(Purchases made on account)
Aug-16	Accounts Payable	$      48,000			D
	Purchase Discount		$               960			I
	Cash		$         47,040	D
	(Cash paid after 2% discount)
Aug-20	Cash	$         1,000		I
	Purchase Returns and allowances		$           1,000			I
	(Refund received for defective products)
Aug-31	Accounts Payable	$      66,000			D
	Cash		$         66,000	D
	(Cash paid)
Aug-31	Accounts Payable	$         4,000			D
	Purchase Returns and allowances		$           4,000			I
	(Purchase return made)