Question 6 (10 marks) The following are merchandising transactions of Wave Company, which applies the Periodic...

 

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Question 6 (10 marks) The following are merchandising transactions of Wave Company, which applies the Periodic inventory system. July 3 July 4 July 7 July 10 July 11 July 12 July 14 Purchased merchandise from CAP Company for RO. 15,000 under credit terms of 1/10, n/30, FOB destination. At CAP's request, Wave paid RO. 250 cash for freight charges on the July 3 purchase, reducing the amount owed to CAP. Sold merchandise to Morris Company for RO. 10,500 under credit terms of 2/10, n/60, FOB destination. The merchandise had cost RO. 7,500. Purchased merchandise from Dock Corporation for RO. 14,200 under credit terms of 1/10, n/45, FOB shipping point. The invoice showed that at Wave's request, Dock paid the RO. 600 shipping charges and added that amount to the bill. (Hint: Discounts are not applied to freight and shipping charges). Paid RO. 300 cash for shipping charges related to the July 7 sale to Morris Company. Morris returned merchandise from the July 7 sale that had cost Wave RO. 1,250 and been sold for RO. 1,750. The merchandise was restored to inventory. After negotiations with Dock Corporation concerning problems with the merchandise purchased on July 10, Wave received a credit memorandum from Dock granting a price reduction of RO. 2,000. Instructions: a) Prepare the journal entries to record all the above transactions. (8 Marks) b) Can a company change its inventory method each accounting period? Explain. (To answer this part, the words must be at least 100 words). (2 Marks) Question 6 (10 marks) The following are merchandising transactions of Wave Company, which applies the Periodic inventory system. July 3 July 4 July 7 July 10 July 11 July 12 July 14 Purchased merchandise from CAP Company for RO. 15,000 under credit terms of 1/10, n/30, FOB destination. At CAP's request, Wave paid RO. 250 cash for freight charges on the July 3 purchase, reducing the amount owed to CAP. Sold merchandise to Morris Company for RO. 10,500 under credit terms of 2/10, n/60, FOB destination. The merchandise had cost RO. 7,500. Purchased merchandise from Dock Corporation for RO. 14,200 under credit terms of 1/10, n/45, FOB shipping point. The invoice showed that at Wave's request, Dock paid the RO. 600 shipping charges and added that amount to the bill. (Hint: Discounts are not applied to freight and shipping charges). Paid RO. 300 cash for shipping charges related to the July 7 sale to Morris Company. Morris returned merchandise from the July 7 sale that had cost Wave RO. 1,250 and been sold for RO. 1,750. The merchandise was restored to inventory. After negotiations with Dock Corporation concerning problems with the merchandise purchased on July 10, Wave received a credit memorandum from Dock granting a price reduction of RO. 2,000. Instructions: a) Prepare the journal entries to record all the above transactions. (8 Marks) b) Can a company change its inventory method each accounting period? Explain. (To answer this part, the words must be at least 100 words). (2 Marks)

Answer rating: 100% (QA)

Journal Date Account Debit Credit 03Jul20 Purchases 15000 Accounts payable 15000 04Jul20 Accounts payable 250 Cash 250 07Jul20 Accounts receivable 105... View the full answer