Question

Teague Company engaged in the following transactions in October 2014:
Oct. 7 Sold merchandise on credit to Mel Forde, terms n/30, FOB shipping point, $12,000 (cost, $7,200).
8 Purchased merchandise on credit from Surf Company, terms n/30, FOB shipping point, $24,000.
9 Paid Surf Company for shipping charges on merchandise purchased on October 8, $1,016.
10 Purchased merchandise on credit from Tata Company, terms n/30, FOB shipping point, $38,400, including $2,400 freight costs paid by Tata.
14 Sold merchandise on credit to David Johnson, terms n/30, FOB shipping point, $9,600 (cost, $5,760).
14 Returned damaged merchandise received from Surf Company on October 8 for credit, $2,400.
17 Received check from Mel Forde for her purchase of October 7.
19 Sold merchandise for cash, $7,200 (cost, $4,320).
20 Paid Tata Company for purchase of October 10.
21 Paid Surf Company the balance from the transactions of October 8 and October 14.
24 Accepted from David Johnson a return of merchandise, which was put back in inventory, $800 (cost, $480).

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, Teague 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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