topic: accounting for merchandise activities

Inh $50 per pair G me following is a series of related transactions between Texas Wholesale Corp. and Boot Hill. a PROBLEM or retail stores: Texas Wholesale Corp. sold Boot Hill 100 pairs of boots on account, terms 1/10.30. LO 3,7 The cost of these boots to Texas Wholesale was 532 per pair, and the sales price was Merchandis Fra 12 United Express charged $162 for delivering this merchandise to Boot Hill. These charges were split evenly between the buyer and seller, and were paid immediately in & J Boot Hill retumed 10 pairs of boots to Texas Wholesale because they were the wrong style. Texas Wholesale allowed Boot Hill full credit for this retum. 19 Boot Hill paid the remaining balance due to Texas Wholesale within the discount Boot companies use a perpetual inventory system. cash. period. Mandons Record this series of transactions in the general journal of Texas Wholesale Corp. (The com- pany records sales at gross sales price.) A Record this series of transactions in the general journal of Boot Hill. (The company records purchases of merchandise at net cost and uses a Transportation-in account to record trans- portation charges on inbound shipments.) Boot Hill does not always have enough cash on hand to pay for purchases within the discount period. However, it has a line of credit with its bank, which enables Boot Hill to easily bor- row money for short periods of time at an annual interest rate of 9%. "(The bank charges in- Lerest only for the number of days until Boot Hill repays the loan.) As a matter of general pol. ity, should Boot Hill take advantage of 1/10, 1/30 cash discounts even if it must borrow the money to do so at an annual rate of 9%? Explain fullyand illustrate any supporting com- putations. Problems Feb. 9 cash. The following is a series of related transactions between Texas Wholesale Corp. and Boot Hill, a PR chain of retail stores: Me Texas Wholesale Corp. sold Boot Hill 100 pairs of boots on account, terms 1/10./30. LC The cost of these boots to Texas Wholesale was $32 per pair, and the sales price was $50 per pair Feb. 12 United Express charged S162 for delivering this merchandise to Boot Hill. These charges were split evenly between the buyer and seller, and were paid immediately in Feb. 13 Boot Hill retumed 10 pairs of boots to Texas Wholesale because they were the wrong style. Texas Wholesale allowed Boot Hill full credit for this retum. Feb. 19 Boot Hill paid the remaining balance due to Texas Wholesale within the discount period. Both companies use a perpetual inventory system. Instructions a Record this series of transactions in the general journal of Texas Wholesale Corp. (The com- pany records sales at gross sales price.) bu Record this series of transactions in the general journal of Boot Hill . (The company records purchases of merchandise at net cost and uses a Transportation in account to record trans- portation charges on inbound shipments.) c. Boot Hill does not always have enough cash on hand to pay for purchases within the discount period. However, it has a line of credit with its bank, which enables Boot Hill to easily bor- row money for short periods of time at an annual interest rate of 9%. "(The bank charges in- terest only for the number of days until Boot Hill repays the loan.) As a matter of general pol- icy, should Boot Hill take advantage of 1/10, 1/30 cash discounts even if it must borrow the money to do so at an annual rate of 9%? Explain fully-and illustrate any supporting com- putations