Question

Fulco Company engaged in the following transactions in March 2014:
Mar. 7 Sold merchandise on credit to James William, terms n/30, FOB shipping point, $3,000 (cost, $1,800).
8 Purchased merchandise on credit from Leverage Company, terms n/30, FOB shipping point, $6,000.
9 Paid Leverage Company for shipping charges on merchandise purchased on March 8, $254.
10 Purchased merchandise on credit from Rourke Company, terms n/30, FOB shipping point, $9,600, including $600 freight costs paid by Rourke.
14 Sold merchandise on credit to Deepak Soni, terms n/30, FOB shipping point, $2,400 (cost, $1,440).
14 Returned damaged merchandise received from Leverage Company on March 8 for credit, $600.
17 Received check from James William for his purchase of March 7.
19 Sold merchandise for cash, $1,800 (cost, $1,080).
20 Paid Rourke Company for purchase of March 10.
21 Paid Leverage Company the balance from the transactions of March 8 and March 14.
24 Accepted from Deepak Soni a return of merchandise, which was put back in inventory, $200 (cost, $120).

Required
1. Prepare journal entries to record the transactions, assuming use of the perpetual inventory system. (Hint: Refer to the TriLevel Problem feature.)
2. Receiving cash rebates from suppliers based on the past year’s purchases is a common practice in some industries. If, at the end of the year, Fulco receives rebates in cash from a supplier, should these cash rebates be reported as revenue? Why or why not?



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  • CreatedMarch 26, 2014
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