Asked by Nicole Alexander on Apr 25, 2024
Merchandise with a list price of $4,200 and costing $2,300 is sold on account, subject to the following terms: FOB destination, 2/10, n/30. The seller prepays the freight costs of $85 (debit Delivery Expense for the freight costs). Prior to payment for the goods, the seller issues a credit memo for $750 to the customer for merchandise costing $425 that is returned. Payment is received within the discount period. The company uses a perpetual inventory system.Record the foregoing transactions of the seller in the sequence indicated below.(a)Sold the merchandise, recognizing the sale and cost of goods sold.(b)Paid the freight charges.(c)Issued the credit memo.(d)Received payment from the customer.
FOB Destination
A shipping term indicating that the seller bears freight charges and retains ownership of goods in transit until they are delivered and accepted by the buyer.
Perpetual Inventory System
A method of inventory management where updates are made continuously to record sales and purchases.
Credit Memo
A document issued by a seller that reduces the amount owed by a buyer, typically due to a return or rebate.
- Digest and engage with the perpetual inventory system in the archiving of transactions.
- Acquire knowledge of and utilize terms related to sales, including FOB shipping point and FOB destination.
- Register sales activities in financial records, including considerations for sales returns and allowances.
Learning Objectives
- Digest and engage with the perpetual inventory system in the archiving of transactions.
- Acquire knowledge of and utilize terms related to sales, including FOB shipping point and FOB destination.
- Register sales activities in financial records, including considerations for sales returns and allowances.