Q7SE - Horngren'S Financial And Managerial Accounting

Question

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.

Step-by-Step Solution

Answer

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.

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)