Part A (3 Marks)

The following transactions occurred in the Zahid Company which applies the perpetual inventory system during the month of December.

December 1: Purchased merchandise from Dana Company for $8,500 under credit terms of 1/15, n/30, FOB shipping point, invoice dated December 1.

December 5: Sold merchandise to Sara Co. for $1,200 under credit terms of 2/10, n/60, FOB shipping point, invoice dated December 5. The merchandise had cost amounting $900.

December 15: Received the balance due from Sara Company within the discount period.

Required: -

Prepare journal entries to record the above merchandising transactions of Zahid Company on the specified dates.

Part B (1 Mark)

A company purchased $10,000 of merchandise on June 15 with terms of 3/10, n/45, and FOB shipping point. The freight charge was $500. On June 20, it returned $800 of that merchandise. On June 24, it paid the balance owed for the merchandise taking any discount it is entitled to.

Required:

Compute the amount of cash paid on June 24.

Note: Show the rough work how you computed the amount of cash paid.

Part C (1 Mark)

Write down the difference between the terms FOB shipping point and FOB destination generally used on the invoice.