On December 27, 2017, Mint Company placed an order to purchase merchandise on account from a seller, Lemon, Inc. Lemon’s listed catalog price for the merchandise is $13,000. Lemon’s historical cost for these items is $4,000. Mint has been a customer of Lemon’s for years and was able to negotiate these terms: 

(i) a 7% trade discount 

(ii) payment terms of 2/10, n/30. The goods were shipped by Lemon FOB shipping point on December 30, 2017 and arrived at Mint’s facility on January 5, 2018. At the time of shipment, Lemon paid $700 in shipping costs. On January 6, Mint returned $2,000 worth of merchandise to Lemon, which had an original cost to Lemon of $615. Mint paid Lemon in full on January 7.

Show all of your work and calculations, and make sure you answer all parts of the question.

Required:

1.  Prepare the seller’s (Lemon) entries for the sale, return, and collection of payment in the following format:

Date: MM/DD/YY

Dr. Account………...XX

Cr. Account…………...XX

2. Prepare the buyer’s (Mint) entries for the purchase, return, and payment to Lemon in the following format:

Date: MM/DD/YY

Dr. Account………...XX

Cr. Account…………...XX

3. Assume all facts are the same, except the shipping terms are FOB destination. Prepare the seller’s (Lemon) entry for the sale in the following format:

Date: MM/DD/YY

Dr. Account………...XX

Cr. Account…………...XX

4. Assume all facts are the same, except the shipping terms are FOB destination. Prepare the buyer’s (Mint) entry for the sale in the following format:

Date: MM/DD/YY

Dr. Account………...XX

Cr. Account…………...XX

5. Explain the difference between a purchase discount and a trade discount.

Answer rating: 100% (QA)

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