The following transactions were recorded by an inexperienced bookkeeper during the months of June and July for Sunland Company Sunland Company uses a perpetual inventory system. June 10 11 12 20 A purchase of $3,500 of merchandise from DanDan Distributors was debited to Purchases and credited to Cash. The terms of the purchase were 2/10,n/30, FOB shipping point The invoice for freight in the amount of $195 for the delivery of merchandise purchased from DanDan was paid and was debited to Delivery Expense. Damaged goods totalling $100 were returned to Dan Dan Distributors for credit. The bookkeeper recorded a debit to Accounts Receivable and a credit to Sales Returns and Allowances. A payment was made to DanDan Distributors for $3,500. The payment was a debit to Purchases and a credit to Cash. Sunland sold goods for $9,085: Sales was credited and Cost of Goods Sold was debited for this amount. The cost of the inventory sold was $3,400. The terms of the sale were 1/15, 1/30, FOB destination Freight charges on the above transaction were debited to Accounts Receivable and credited to Cash for $215. The bookkeeper believed the customer had to pay for the freight charges. Sunland's manager gave the customer from July 15 a $260 allowance. The entry made to record the allowance was a debit to Sales and a credit to Sales Returns and Allowances, a July 15 15 17 Review each transaction below and indicate whether you agree or disagree with how the bookkeeper accounted for the transaction WORK June 10 11 12 20 A purchase of $3,500 of merchandise from DanDan Distributors was debited to purchases and credited to Cash. The terms of the purchase were 2/10, 1/30. FOB shipping point The invoice for freight in the amount of $195 for the delivery of merchandise purchased from DanDan was paid and was debited to Delivery Expense. Damaged goods totalling $100 were returned to Dan Dan Distributors for credit. The bookkeeper recorded a debit to Accounts Receivable and a credit to Sales Returns and Allowances A payment was made to Dan Dan Distributors for $3,500. The payment was a debit to Purchases and a credit to Cash Sunland sold goods for $9.085: Sales was credited and cost of Goods Sold was debited for this amount. The cost of the inventory sold was $3,400. The terms of the sale were 1/15,6/30, F08 destination Freight charges on the above transaction were debited to Accounts Receivable and credited to Cash for $215. The bookkeeper believed the customer had to pay for the freight charges. Sunland's manager gave the customer from July 15 a $260 allowance. The entry made to record the allowance was a debit to Sales and a credit to Sales Returns and Allowances, July 15 15 17 Date Account Titles and Explanation Debit Credit (To record purchase on account.) 1 (To record cash payment for freight costs) (To record purchase return) (To record payment on account) I (To record sales on account.) (To record cost of goods sold) F (Cash payment for freight costs.) (To record sales allowance)
