ACCOUNTING apter 6 Homework Questions 35 of 8 The following

ACCOUNTING apter 6 Homework Questions 3-5 (of 8) The following information applies to the questions displayed below. The transactions listed below are typical of those involving Amalgamated Textiles and American Fashions Amalgamated is a wholesale merchandiser and American Fashions is a retail merchandiser. Assume all sales of merchandise from Amalgamated to American Fashions are made with terms 3/10. 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 December 31. a. Amalgamated sold merchandise to American Fashions at a selling price of $245,000. The merchandise had cost Amalgamated $181,000 b. Two days later, American Fashions complained to Amalgamated that some of the merchandise differed from what American Fashions had ordered. Amalgamated agreed to give an allowance of $6,500 to American Fashions. c. Just three days later, American Fashions paid Amalgamated, which settled all amounts owed. value: 1.25 points

Solution

Calculations and explanations:

Net amount due from American Fashions = 245,000 - 6,500 = $238,500

3% discount will be applicable on $238,500. Thus discount amount = 3% of 238,500 = $7,155

Cash paid by American Fashions = 238500-7155 = $231,345

No.	Transaction	General Journal	Debit	Credit
1	a(1)	Accounts receivable	245,000.00
		Sales		245,000.00
2	a(2)	Cost of goods sold	181,000.00
		Merchandise Inventory		181,000.00
3	b	Sales return and allowances	6,500.00
		Accounts receivable		6,500.00
4	c	Sales discount	7,155.00
		Cash	231,345.00
		Accounts Receivable		238,500.00