PA6-2 Reporting Sales Transactions between Wholesale and Retail Merchandisers Using Perpetual Inventory Systems (LO 6-4, LO 6-5) The transactions listed below are typical of those involving New Books Inc. and Readers' Corner. New Books is a wholesale merchandiser and Readers' Corner is a retail merchandiser. Assume all sales of merchandise from New Books to Readers' Corner are made with terms 2/10, 1/30, and that the two companies use perpetual inventory systems. Assume the following transactions between the two companies occurred in the order listed during the year ended August 31. a New Books sold merchandise to Readers' Corner at a selling price of $640,000. The merchandise cost New Books $451,000. b. Two days later, Readers' Corner complained to New Books that some of the merchandise differed from what Readers' Corner had ordered. New Books agreed to give an allowance of $12,500 to Readers' Corner c. Just three days later, Readers Corner paid New Books, which settled all amounts owed. Required: 1. For each of the events (a) through (c), indicate the amount and direction of the effect on New Books in terms of the following items. (Enter any decreases to account balances with a minus sign.) Transaction Sales Revenues Sales Returns and Allowances Sales Discounts Net Sales Cost of Goods Sold Gross Profit b. 2. Which of the below items are likely to be reported on New Books' external financial statements, and which items will be combined 2. Which of the below items are likely to be reported on New Books' external financial statements, and which items will be combined behind the scenes? Sales revenues Sales returns and allowances Sales discounts Net sales Cost of goods sold Gross profit Help 3. Prepare the journal entries to record New Books transactions. (If no entry is required for a transaction/event, select "No Journal entry required" in the first account field.) View transaction list Journal entry worksheet