Annie opened a wholesale clothing business on 1 August 206. She received the following documents during August

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Annie opened a wholesale clothing business on 1 August 20–6. She received the following documents during August 20–6:

Invoices

August 4 From Sue, for goods, list price $1,960 less 25% trade discount

15 From Amos, for goods, list price $290

21 From Jane, for goods, list price $2,950 less 20% trade discount

Credit notes

August 10 From Sue, for return of faulty goods, list price $120, purchased on 4 August

26 From Jane, for return of all the goods purchased on 21August as not what was ordered

Annie issued the following documents during August 20–6:

Invoices

August 7 To Andrew, for goods, list price $2,100

18 To Ben, for goods, list price $3,150 less 20% trade discount

27 To Andrew, for goods, list price $1,820

Credit note

August 29 To Andrew, for half of the goods purchased on 27 August returned as faulty

a. Make the necessary entries in the purchases journal, sales journal, purchases returns journal and sales returns journal.

b. Make the necessary posting to the appropriate accounts in the purchase ledger, sales ledger and nominal ledger. It is not necessary to balance or total any of the accounts.

c. Suggest two reasons why Annie allowed Andrew a trade discount.

d. Name the document which Annie may have issued before she received a credit note from Sue on 10 August.

e. Explain why Annie may issue a statement of account to each credit customer at the end of every month.

On 21 September 20–6 Annie paid the amount owing to Sue on 31 August, less a cash discount of 3%.

f. Calculate the amount paid to Sue on 31 August 20–6.

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