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The following are merchandising transactions of Stone Company, which applies the perpetual inventory system. Aug 1 Purchased merchandise from Abilene Company for RO. 6,000 under
The following are merchandising transactions of Stone Company, which applies the perpetual inventory system. Aug 1 Purchased merchandise from Abilene Company for RO. 6,000 under credit terms of 1/10, n/30, FOB destination. Aug 4 At Abilene's request, Stone paid RO. 100 cash for freight charges on the August 1 purchase, reducing the amount owed to Abilene. Aug 5 Sold merchandise to Lux Corp. for RO. 4,200 under credit terms of 2/10, n/60, FOB destination. The merchandise had cost RO. 3,000. Aug 8 Purchased merchandise from Welch Corporation for RO. 5,300 under credit terms of 1/10, n/45, FOB shipping point. The invoice showed that at Stone's request, Welch paid the RO. 240 shipping charges and added that amount to the bill. (Hint: Discounts are not applied to freight and shipping charges). Aug 9 Paid RO. 120 cash for shipping charges related to the August 5 sale to Lux Corp. Aug 10 Lux returned merchandise from the August 5 sale that had cost Stone RO. 500 and been sold for RO. 700. The merchandise was restored to inventory. Aug 12 After negotiations with Welch Corporation concerning problems with the merchandise purchased on August 8, Stone received a credit memorandum from Welch granting a price reduction of RO. 800. Aug 18 Paid the amount due Welch Corporation for the August 8 purchase. Instructions: a) Prepare Journal Entries to record the above transactions. (7 Marks) b) What is the process for posting to a subsidiary ledger and its controlling account? (number of words required must not be less than 100 words)
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