Use the information in PA6-6 (page 295 in Chapter 6) to complete the following requirements.
Information From PA6-6
a. New Books sold merchandise to Readers' Corner at a selling price of $550,000. The merchandise had cost New Books $415,000.
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 $10,000 to Readers' Corner.
c. Just three days later, Readers' Corner paid New Books, which settled all amounts owed.
Required:
1. Indicate the effect (direction and amount) of each transaction on the Inventory balance of Readers' Corner.
2. Prepare the journal entries that Readers' Corner would record and show any computations.