The transactions listed below are typical of those involving New
Books Inc. and Readers’ Corner. New Books is a wholesale
merchandiser and Readers’ Corner is a retail merchandiser. Assume
all sales of merchandise from New Books to Readers’ Corner are made
with terms n/30, and the two companies use perpetual inventory
systems. Assume the following transactions between the two
companies occurred in the order listed during the year ended August
31.
- New Books sold merchandise to Readers’ Corner at a selling price of $650,000. The merchandise had cost New Books $455,000.
- Two days later, Readers’ Corner complained to New Books that some of the merchandise differed from what Readers’ Corner had ordered. New Books agreed to give an allowance of $13,500 to Readers’ Corner. Readers’ Corner also returned some books, which had cost New Books $4,000 and had been sold to Readers’ Corner for $5,500.
- Just three days later, Readers’ Corner paid New Books, which settled all amounts owed.
- Prepare the journal entries that Readers’ Corner would record. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
