Acc225 Fundamentals of Accounting Principles: E5-4 Spare Parts was organized on May 1, 2005

Acc225 Fundamentals of Accounting Principles
Exercise 5-4 Recording sales returns and allowances
Spare Parts was organized on May 1, 2005, and made its first purchase of merchandise on May 3. The purchase was for 1,000 units at a price of $10 per unit. On May 5, Spare Parts sold 600 of the units for $14 per unit to DeSoto Co. Terms of the sale were 2/10, n/60.

Prepare entries for Spare Parts to record the May 5 sale and each of the following separate transactions a through c using a perpetual inventory system.
a. On May 7, DeSoto returns 200 units because they did not fit the customer’s needs. Spare Parts restores the units to its inventory.
b. On May 8, DeSoto discovers that 50 units are damaged but of some use and, therefore, keeps the units. Spare Parts sends DeSoto a credit memorandum for $300 to compensate for the damage.
c. On May 15, DeSoto returns 100 defective units and Spare Parts concludes that these units cannot be resold. As a result, Spare Parts discards them—it removes these units’ cost from cost of good sold and records a loss from defective merchandise.
Powered by