Sales Related Transactions Steritech Co , a furniture wholesaler, sells merchandise to Butler Co on account, $86,000, terms 2 10, n 30 The cost of the merchandise sold is $51,600 Steritech Co issues a credit memorandum for $5,000 ($4,900 net of the 2 discount) for merchandise that was damaged in shipment Butler Co agreed to keep the damaged merchandiise Illustrate the effects on the accounts and financial statements of Steritech Co If no account or activity is affected, select No effect from the dropdown and leave the corresponding number entry box blank a The sale, including the cost of the merchandise sold Enter account decreases, cash outflows, and the cost of merchandise sold as negative amounts Statement of Cash Flows Balance Sheet Income Statement Assets Liabilities Stockholders' Equity Accounts Receivable Inventory No Effect No Effect Statement of Cash Flows Income Statement No effect Sales Cost of goods sold Net income b The credit memorandum Enter account decreases as negative amounts When entering the income statement effects, enter amounts that decrease net income as negative values Statement of Cash Flows Balance Sheet Income Statement Assets Liabilities Stockholders' Equity No Effect Inventory No Effect Statement of Cash Flows Income Statement No effect Net income c The receipt of the check for the amount due from Butler Co Enter account decreases as negative amounts When entering the income statement effects, enter amounts that decrease net income as negative values Statement of Cash Flows Balance Sheet Income Statement Assets Liabilities Stockholders' Equity Accounts Payable No Effect No Effect No Effect Statement of Cash Flows Income Statement No effect Sales returns and allowances Feedback a Analyze the transactions from the seller's perspective Keep in mind that two entries are required for the transaction (1) for the sale on account and (2) for the cost of the merchandise sold (expense) and inventory reduction on the seller's records b The Cust Refunds Payable are debited while the credit is applied to the buyers Accounts Receivable c The cash received is the amount owed by the buyer for the sale, minus the discount and refund Accounts Receivable will be reduced by the original amount of the sale less the refund

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Sales-Related Transactions Steritech Co., a furniture wholesaler, sells merchandise to Butler Co. on account, $86,000, terms 2/10, n/30. The cost of the merchandise sold is

Sales-Related Transactions

Steritech Co., a furniture wholesaler, sells merchandise to Butler Co. on account, $86,000, terms 2/10, n/30. The cost of the merchandise sold is $51,600. Steritech Co. issues a credit memorandum for $5,000 ($4,900 net of the 2% discount) for merchandise that was damaged in shipment. Butler Co. agreed to keep the damaged merchandiise. Illustrate the effects on the accounts and financial statements of Steritech Co.

If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank.

a. The sale, including the cost of the merchandise sold. Enter account decreases, cash outflows, and the cost of merchandise sold as negative amounts.

Statement of Cash Flows	Balance Sheet								Income Statement
	Assets			=	Liabilities	+	Stockholders' Equity
	Accounts Receivable	+	Inventory	=	No Effect	+		No Effect

Statement of Cash Flows								*Income Statement*
No effect								Sales
								Cost of goods sold
								Net income

b. The credit memorandum. Enter account decreases as negative amounts. When entering the income statement effects, enter amounts that decrease net income as negative values.

Statement of Cash Flows	Balance Sheet								Income Statement
	Assets			=	Liabilities	+	Stockholders' Equity
	No Effect	+	Inventory	=	No Effect	+

Statement of Cash Flows								*Income Statement*
No effect								Net income

c. The receipt of the check for the amount due from Butler Co. Enter account decreases as negative amounts. When entering the income statement effects, enter amounts that decrease net income as negative values.

Statement of Cash Flows	Balance Sheet								Income Statement
	Assets			=	Liabilities	+	Stockholders' Equity
	Accounts Payable	+	No Effect	=	No Effect	+		No Effect

Statement of Cash Flows								*Income Statement*
No effect								Sales returns and allowances

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a. Analyze the transactions from the seller's perspective. Keep in mind that two entries are required for the transaction: (1) for the sale on account and (2) for the cost of the merchandise sold (expense) and inventory reduction on the seller's records.

b. The Cust. Refunds Payable are debited while the credit is applied to the buyers Accounts Receivable.

c. The cash received is the amount owed by the buyer for the sale, minus the discount and refund. Accounts Receivable will be reduced by the original amount of the sale less the refund.