Exercise A
For each account, identify the account type, normal balance, how to increase and decrease the account using Debit or Credit and how is the account used (by buyer, seller, or both).
Account Title	Account Type	Normal Balance (debit or credit)	Increased by (debit or credit)	Decreased by (debit or credit)	Used in(buyer and/or seller) entries
Accounts Payable
Merchandise Inventory
Cash
Sales Discounts
Sales Returns and Allowances
Accounts Receivable
Sales
Delivery Expense
Cost of Goods Sold
Problem B: Prepare journal entries for each independent company.
a. Spencer Sporting Goods
Spencer Sporting Goods Company engaged in the following transactions in April:
Apr. 1 Sold merchandise on account for $288,000; terms 2/10, n/30, FOB shipping point, purchased for $200,000.
Apr 5 $43,200 of the goods sold on account on April 1 were returned for a full credit. Payment for these goods had not yet been received. The original cost of the goods was $30,000.
Apr 8 A sales allowance of $5,760 was granted on the merchandise sold on April 1 because the merchandise was damaged in shipment.
Apr 10 Payment was received for the net amount due from the sale of April 1.
Apr 1	Are we the buyer or seller in this transaction?
	What do terms 2/10, N30 mean?
	What does FOB Shipping Point mean?
Prepare the Apr 1 entry:	DEBIT	CREDIT
Apr 1
Apr 5	What does cost of goods sold mean?
Prepare the Apr 5 entry:	DEBIT	CREDIT
Apr 5
Apr 8	What is the difference between a return and an allowance?
Prepare the Apr 8 entry:	DEBIT	CREDIT
Apr 8
Apr 10	Amount owed for April 1 before the discount is:
	If paid within the discount amount, the discount is:
Prepare the Apr 10 entry:	DEBIT	CREDIT
Apr 10
b. High Stereo Company
High Stereo Company engaged in the following transactions in July:
July 2 Purchased stereo merchandise on account at a cost of $43,200; terms 1/10, n/30, FOB shipping point. High Stereo paid shipping cost of $1,500 on this purchase.
July 15 Sold merchandise for $64,800, terms 2/15, n/30, FOB destination with a purchase cost of $40,000.
July 16 Paid freight costs on the merchandise sold, $2,160.
July 20 High Stereo Company was granted an allowance of $2,880 on the purchase of July 2 because of damaged merchandise.
July 31 Paid the amount due on the purchase of July 2.
Date
Jul 2	Are we the buyer or seller in this transaction?
	What account is used to record shipping? Why?
Prepare the Jul 2 entries below:	DEBIT	CREDIT
Jul 2
Jul 2
Jul 15	Are we the buyer or seller in this transaction?
	FOB Destination means person responsible to pay shipping is:
	What account is used to record freight cost in this case?
Prepare the Jul 15 entry:	DEBIT	CREDIT
Jul 15
Jul 16	Are we the buyer or seller in this transaction?
Prepare the Jul 16 entry:	DEBIT	CREDIT
Jul 16
Jul 20	Are we the buyer or seller in this transaction?
Prepare the Jul 20 entry:	DEBIT	CREDIT
Jul 20
Is there a difference in how we record returns and allowances for the buyer?
Jul 31	Amount owed for July 2 Purchase is:
	What is the discount amount allowed to be taken?
Prepare the Jul 31 entry:	DEBIT	CREDIT
Jul 31