Question 1 (20 marks) Part A: (16 marks) Great Company is a merchandiser of mobile phones. Perpetual inventory system and gross transaction method are used in the company. The following are the transactions of March 1 2 3 4 5 8 Purchased merchandise from Foxconn Ltd for $32,000 with terms 1/15, n/60, FOB shipping point, invoice date March 1. Purchased merchandise from Huawei Company for $50,000 with terms 2/10, n/60, FOB destination point, invoice date March 2. Paid $1,000 cash for shipping charges on the purchase of March 1 Paid $600 cash for shipping charges on the purchase of March 2 at the request of Huawei Company Great's staff checked the goods purchased on March 1 and found some defective items. After negotiations with Foxconn, Great Company received a price reduction of $2,000 off the $32,000 of goods purchased. Sold merchandise to A&A Company for $18,000 under credit terms of 2/7, n/30, FOB destination; invoice dated March 8. The merchandise had cost s 12,000. Paid S200 cash for shipping charges related to the sale to A&A Company on March 5. A&A returned merchandise from March 8 sale that had cost Great Company $600 and was sold for $900. The merchandise was restored to inventory Received balance due from A&A for the March 8 sale less return on March 12. Paid the amount due to Foxconn Ltd for the March 1 purchase less price reduction granted on March 5. Paid the amount due to Huawei Company for the March 2 purchase less any expense claimed on Huawei. 10 12 14 16 17 Required: Prepare journal entries to record the above transactions for Great Company. To be continued in next page Part B: (4 marks) 1. AA Company in Guangzhou (seller) sold merchandise to BB Ltd located in Shanghai (Buyer) for $90,000 under terms of FOB destination point, invoice dated April 28. EMS Courier (China Post Service) was appointed to deliver the merchandise from Guangzhou to Shanghai. On May 1. the merchandise was carried by EMS towards Shanghai, but the EMS's delivery truck was involved in a very serious traffic accident at G60 Highway (Guodao 60) and goods in the vehicle were all destroyed. Please advise, does BB Ltd need to pay $90,000 for the merchandise destroyed in the accident? (Give the reasons to support your answer). (2 marks) 2. Merchandiser uses Periodic Inventory system relies on period physical count to find out ending inventory and work out cost of goods sold for the period. For those companies using Perpetual Inventory system, are they required to do period physical count? Give your explanation. (2 marks) (Total 20 marks)