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Q7SE

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Horngren'S Financial And Managerial Accounting
Found in: Page 296

Short Answer

On November 4, 2018, Cain Company sold merchandise inventory on account to Tarin Wholesalers, $12,000, that cost $4,800. Terms 3/10, n/30. On November 5, 2018, Tarin Wholesalers paid shipping of $30. Tarin Wholesalers paid the balance to Cain Company on November 13, 2018.

Requirements

1. Journalize Tarin Wholesaler’s November transactions.

2. Journalize Cain Company’s November transactions.

Answer

The total of debits and credits of Tarin Wholesaler is $24,030.

The total of debits and credits of Cain Company is $28,080.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Commercial Activities

In business terms, commercial activities refer to the events that are conducted for the exchange of goods or services in the market to make economic benefits. Commercial activities must be ethical and should not harm the environment, society, and the parties involved.

Step 2: Preparation of journal entries for Tarin Wholesaler

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Nov 4

Merchandise Inventory

12,000

Accounts payable

12,000

(To record the purchase of inventories)

Nov 5

Merchandise Inventory

30

Cash

30

(To record the payment of shipping cost)

Nov 13

Accounts payable

12,000

Cash (12,000-360)

11,640

Merchandise inventory (12,000*3%)

360

(To record the payment)

Step 3: Preparation of journal entries for Cain Company

Date

Accounts and Explanation

Debit ($)

Credit ($)

2018

Nov 4

Accounts receivable (12,000-3%*12,000)

11,640

Sales revenue

11,640

(To record the sales on account)

Nov 4

Cost of goods sold

4,800

Merchandise inventory

4,800

(To record the cost of goods sold)

Nov 13

Cash

11,640

Accounts receivable

11,640

(To record the receipt of payment)

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