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.

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.

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.

Balance Sheet Statement of Income Assets Liabilities + Stockholders' Equity Cash Flows Statement Accounts Receivable + Inventory No Effect + Retained Earnings Statement of Cash Flows Income Statement No effect Sales Cost of goods sold Net income Balance Sheet Statement of Income Assets = Liabilities + Stockholders' Equity Cash Flows Statement Accounts Receivable + No Effect Cust. Refunds Payable + No Effect Statement of Cash Flows Income Statement No effect No effect Balance Sheet Statement of Stockholders' Income Assets = Liabilities + Cash Flows Equity Statement Cash + Accounts Receivable = No Effect + No Effect Statement of Cash Flows Income Statement Operating No effect