Blue Coral Inc. shipped merchandise with a total value of $63,000 to Formosa Ltd. on May 1. The agreement between the two companies was that Formosa was to sell the product on consignment for Blue Coral. Thus, Blue Coral incurred $5,200 in shipping costs in order to ship the merchandise. Formosa paid a local newspaper $2,000 for advertising costs (which Ivanhoe promised to reimburse). At September 30, the end of the accounting year for both companies, Formosa had sold 70% of the merchandise for total sales of $74,000. Formosa notified Blue Coral of the sales, retained a 20% commission, and remitted the cash due to Blue Coral.

Prepare the journal entries required by the above transactions on the books of Blue Coral.

Here are the choices of accounts that can be used on entries.

No. Account Titles and Explanation Debit Credit (To record shipped merchandise.) 2. To record shipping costs.) 3. To record year end sales entry.) 4. (To record year end cost of goods.)