Problem 1 Chapter 5 Tic Tac Clock Shop Report

Problem 1 Ch 5tic Toc Clock Shop Reported The Following Merchandisin

Problem 1 (ch 5) Tic Toc Clock Shop reported the following merchandising-related transactions during June. Tic Tock Clock Shop records all purchases "gross," and credit terms are precisely followed on both purchases and sales. Prepare journal entries to record each transaction.

Paper For Above instruction

During June, Tic Toc Clock Shop engaged in several merchandising transactions that required proper journal entries in accordance with generally accepted accounting principles. The transactions include purchasing inventory under different terms and conditions, selling merchandise with specific credit arrangements, and handling payments, discounts, and adjustments related to damaged goods. Accurate recording of these transactions is essential for reflecting the company's financial position correctly.

First, on June 3, the store purchased clocks worth $4,000 on account from Swiss Time, with terms 1/10, n/30, F.O.B. destination. Since all purchases are recorded gross, the initial journal entry would reflect the total amount without discount. The credit terms indicate that if paid within 10 days, a 1% discount can be taken; otherwise, the net amount is due in 30 days.

On June 5, Tic Toc Clock Shop sold a clock valued at $1,500 to Janci Holgren on account, with terms 2/10, n/eom. The sale was made with the customer picking up the merchandise, and sales should be recorded at gross amount, with the potential for a discount if paid promptly.

Payment for the June 3 purchase was made on June 9, within the discount period, which requires recording the payment with a 1% discount applied to the invoice amount.

On June 11, the company purchased additional clocks totaling $8,000 from Melbourne Clockworks, with terms 2/10, n/30, and the shipment included freight charges of $460 prepaid by the supplier, added to the invoice. The purchase and freight charges should be recorded appropriately, with freight expensed or capitalized based on company policy.

Subsequently, on June 19, Tic Toc Clock Shop sold a $3,500 clock with terms 2/10, n/eom, and the sale was FOB destination, meaning the seller bears freight charges. The company also paid freight expenses of $330 for this delivery. The sale revenue and freight expenses are recorded accordingly, and the sale should be discounted if paid within terms.

On June 23, the customer of the June 19 sale called reporting damage to the clock, leading to a 20% reduction of the invoice amount. The company needs to record this reduction as a reduction of receivables and adjust revenue accordingly.

Finally, payments were made to Melbourne Clockworks for the June 11 purchase on June 27, and the customer Janci Holgren paid her bill on June 28, settling the account after the discounts and adjustments.

The proper journal entries for these transactions ensure accurate recording of inventory, sales, receivables, payables, discounts, freight charges, and returns. These entries are foundational for creating financial statements that accurately reflect the company's merchandising activities for June comprehensively.

References

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