Prepare General Journal entries to record the following perpetual system merchandising transactions of Good fish Lake Company. Use a separate account for each receivable and payable; for example, record the purchase on July 3 in Accounts Payable-CMP Corp.
July 3 Purchased merchandise from CMP Corp. for $32,000 under credit terms of 1 /10, n/30, FOB destination.
4 At CMP's request, paid $1,500 for freight charges on the )uly 3 purchase, reducing the amount owed to CMP.
7 Sold merchandise to Harbison Co. for $21,000 under credit terms of 2/10, n/60, FOB destination. The merchandise had cost $ 17,500.
10 Purchased merchandise from Cimarron Corporation for $29,300 under credit terms of 1/10, n/45, FOB shipping point.
11 Paid $1,200 shipping charges related to the July 7 sale to Harbison Co.
12 Harbison returned merchandise from the July 7 sale that had cost $2,500 and been sold for $3,500. The merchandise was restored to inventory.
14 After negotiations with Cimarron Corporation concerning problems with the merchandise purchased on July 10, received a credit memorandum from Cimarron granting a price reduction of $4,100.
17 Received balance due from Harbison Co. for the July 7 sale
18 Sold for cash a piece of vacant land for its original cost of $62,000.
19 Purchased a used van for the business, $28,000; paid cash of $10,000 and borrowed the balance from the bank.
20 Paid the amount due Cimarron Corporation for the July 10 purchase.
21, Sold merchandise to Hess for $18,000 under credit terms of 1/10, n/30, FOB shipping point. The merchandise had cost $13,100.
24 Hess requested a price reduction on the July 21 sale because the merchandise did not meet specifications. Sent Hess a credit memorandum for $3,000 to resolve the issue
31 Received Hess's payment of the amount due from the July 21 purchase
31 Paid CMP Corp. the amount due from the July 3 purchase
Analysis Component:
Regarding the July 24 transaction, what alternative is there to granting a credit memorandum? Be sure to identify and explain an advantage and disadvantage of the alternative.