Question

The following transactions occurred. Bigby (buyer) buys supplies from Super Coffee (seller). Apr. 1 Buyer buys merchandise for $5,000, credit terms 1/10,n/30. Merchandise cost $3,500. Apr. 4. Buyer returns $500 of merchandise for full credit. The merchandise is returned to inventory. Apr. 9 Buyer pays the amount due from the April 1 sales less the return on April 1. Prepare journal entries to record the transactions for buyer. Be sure to date eacher (Prefer you use gross method for amount to record.) I 2. Prepare journal entries to record the transactions for the seller. Be sure to date each entry. (Prefer you use gross method for amount to record.)

Answer 1

Date	particulars	Debit	Credit
Apr 1	Purchases A/c   Dr	$5000
	To Super Coffee(Seller) A/c		$5000
Apr 4	Super Coffee ( Seller) A/c    Dr	$500
	To purchase return A/c		$500
Apr 9	Super Coffee (seller) A/c     Dr	$4500
	To Cash		$4455
	To cash discount received A/c		$45

Working Note: As purchases were made on the credit terms 1/10, n/30, which means the buyer may take early payment discount of 1% of the amount, owned if amount is remitted in 10 days instead of normal 30 days. In the above question, Buyer is buying the goods on Apr 1 and paying on Apr 9 (within 10 days and become eligible for 1% discount on $4500 = $45).

Solution 2)Calculation of ending inventory using LIFO method

Value of ending inventory ( LIFO Method) = $2360

Particulars		Units	Cost Per unit price	Value
Sept 1	Opening inventory	50 trees	$20	$1000
Sept 3	Sold	30 trees
	Inventory remaining	20 trees	$20	$400
Sept 5	Inventory purchased	70 trees	$30	$2100
	Inventory remaining	20 trees 70 trees	$20 $30	$400 $2100
Sept 6	Inventory sold	60 trees
	Inventory remaining	20 trees 10 trees	$20 $30	$400 $300
Sept 14	Purchased	90 trees	$40	$3600
	Inventory remaining	20 trees 10 trees 90 trees	$20 $30 $40	$400 $300 $3600
Sept 21	Sold	86 trees
	Inventory remaining	20 trees 10 trees 4 trees	$20 $30 $40	$400 $300 $160
Sept 28	Purchased	30 trees	$50	$1500
	Inventory remaining	20 trees 10 trees 4 trees 30 trees	$20 $30 $40 $50	$400 $300 $160 $1500
	Ending Inventory			$2360

Value of ending inventory (FIFO Method) = $2860

Particulars		Units	Cost Per unit price	Value
Sept 1	Opening inventory	50 trees	$20	$1000
Sept 3	Sold	30 trees
	Inventory remaining	20 trees	$20	$400
Sept 5	Inventory purchased	70 trees	$30	$2100
	Inventory remaining	20 trees 70 trees	$20 $30	$400 $2100
Sept 6	Inventory sold	60 trees
	Inventory remaining	30 trees	$30	$300
Sept 14	Purchased	90 trees	$40	$3600
	Inventory remaining	30 trees 90 trees	$30 $40	$900 $3600
Sept 21	Sold	86 trees
	Inventory remaining	34trees	$40	$1360
Sept 28	Purchased	30 trees	$50	$1500
	Inventory remaining	34 trees 30 trees	$40 $50	$1360 $1500
	Ending Inventory			$2860