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The transactions listed below are typical of those involving New Books Inc. and Readers Corner. New Books is a wholesale merchandiser and Readers Corner is a retail merchandiser. Assume all sales of merchandise from New Books to Readers Corner are made with terms 2/10, n/30, and that the two companies use perpetual inventory systems. Assume the following transactions between the two companies occurred in the order listed during the year ended August 31.

a.	New Books sold merchandise to Readers Corner at a selling price of $600,000. The merchandise had cost New Books $435,000.
b.	Two days later, Readers Corner complained to New Books that some of the merchandise differed from what Readers Corner had ordered. New Books agreed to give an allowance of $15,000 to Readers Corner.
c.	Just three days later, Readers Corner paid New Books, which settled all amounts owed.

Required:

1.

For each of the events (a) through (c), indicate the amount and direction of the effect on New Books in terms of the following items. (Enter any decreases to account balances with a minus sign.)

Transaction	Sales Revenues	Sales Returns and Allowances	Sales Discounts	Net Sales	Cost of Goods Sold	Gross Profit
a.
b.
c.

2.	Which of the below items are likely to be reported on New Books external financial statements, and which items will be combined behind the scenes?

Sales Revenues
Sales Returns and Allowances
Sales Discounts
Net Sales
Cost of Goods Sold
Gross Profit

3.	Prepare the journal entries to record New Books transactions. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

1. Record the sales on account of $600,000 to Readers Corner.

2. Record the cost of goods sold of $435,000.

3. Record the return of $15,000 unsatisfactory merchandise by Readers Corner for which credit was given to the customer.

4. Record the receipt of payment in full from Readers Corner.