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 + Retained Earnings -51,600 0 Statement of Cash Flows Income Statement No effect

0 Sales

Cost of goods sold

-51,600 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 Accounts Receivable + No Effect = Cust. Refunds Payable + No Effect 0 0 Statement of Cash Flows Income Statement No effect

0 No effect

0

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 Cash + Accounts Receivable = No Effect + No Effect 0 0 Statement of Cash Flows Income Statement Operating

No effect

0