QUESION 1.

Merchandising Activities

The following is a series of related transactions between Prime Fashion and Mega Store, a chain of retail clothing stores:

Jun. 01. Prime Fashion sells to Mega Store 1,250 T-Shirts on account, terms 2.50/07, n/30. Prime Fashion bought each T-Shirt for $3.00 and sells it for $7.90 per T-Shirt to Mega Store.

Jun. 03. Mega Store returns 250 T-Shirts to Prime Fashion since they have the wrong color.

Jun. 06. Mega Store pays the remaining balance to Prime Fashion.

Instructions: (a) Record this series of transactions in the General Journal of Prime Fashion. (The company uses the perpetual inventory system and records at gross costs).

(b) Record this series of transactions in the General Journal of Mega Store. (The company uses the periodic inventory system and records at net costs). Credit