PE 6-5B Transactions for buyer and seller

Shore Co. sold merchandise to Blue Star Co. on account, $112,000, terms FOB shipping point, 2/10, n/30. The cost of the merchandise sold is $67,200. Shore Co. paid freight of $1,800 and later received the amount due within the discount period. Journalize Shore Co.’s and Blue Star Co.’s entries for the payment of the amount due.


Answer:

Shore Co. journal entries:
Cash ($112,000 – $2,240 + $1,800) 111,560
Sales Discounts ($112,000 × 2%) 2,240
Accounts Receivable—Blue Star Co. ($112,000 + $1,800) 113,800
Blue Star Co. journal entries:
Accounts Payable—Shore Co. ($112,000 + $1,800) 113,800
Merchandise Inventory ($112,000 × 2%) 2,240
Cash ($112,000 – $2,240 + $1,800) 111,560