Question

You sell merchandise on account for $12,900. The merchandise cost you $7,700. The terms are FOB shipping, 2/10, n/30. You receive a bill from UPS for $210 for transportation costs. The customer takes advantage of the sales discount when he pays you. Record the following transactions.

Answer 1

Journal

Date	Account title	Debit	Credit
i)	Accounts receivables	12,900
	Sales		12,900
ii)	Cost of goods sold	7,700
	Merchandise inventory		7,700
iii)	Cash	12,642
	Sales discount	258
	Accounts receivable		12,900

Discount amount = 12,900 x 2/100

= $258

Cash to be received = Final payment due - discount amount

= 12,900 - 258

= $12,642

When the terms are FOB Shipping, freight is paid by the buyer.

Kindly comment if you need further assistance. Thanks