1. Purchase returns and allowances

Prepare the journal entries to record these transactions in (a) Sauk Stereos records and (b) PW Audio Supply Inc.s records. Assume use of the perpetual inventory system for both companies.

Sauk Stereos book

1. On May 4, Sauk Stereo purchases merchandise from PW Audio Supply, Inc. one printed circuit Board at the cost of $2,300 per unit, and five production models at the cost of $300 per unit with terms 2/10, n/30.

2. Sauk Stereo pays Public Carrier Co. $150 for freight charges on May 6

3. On May 8, Sauk Stereo returned goods costing $300 to PW Audio Supply.

Suppose that instead of returning the goods, Sauk Stereo chose to keep the goods after being granted a $50 allowance (reduction in price).

4. On May 14, Sauk Stereo pays the balance due of $3,500

If Sauk Stereo failed to take the discount, and instead made full payment of $3,500 on June 3

PW Audio Supply Inc.s book

5. PW Audio Supply records the sale of $3,800 on May 4 to Sauk Stereo on account as follows (assume the merchandise cost PW Audio Supply $2,400).

6. If the freight terms on the invoice had required PW Audio Supply (the seller) to pay the freight charges of $150 on May 4

7. Prepare the entry PW Audio Supply would make to record the credit for returned goods that had a $300 selling price (assume a $140 cost). Assume the goods were not defective.

8. Assume the returned goods were defective and had a scrap value of $50.

9. Assume Sauk Stereo pays the balance due of $3,500 (gross invoice price of $3,800 less purchase returns and allowances of $300) on May 14, the last day of the discount period.