Business, 02.03.2020 18:53 stefan19367

This information relates to Shamrock Co.

(1) On April 5, purchased merchandise from Pharoah Company for $28,600, terms 4/10, n/30.
(2) On April 6, paid freight costs of $580 on merchandise purchased from Pharoah.
(3) On April 7, purchased equipment on account for $32,000.
(4) On April 8, returned $3,500 of April 5 merchandise to Pharoah Company.
(5) On April 15, paid the amount due to Pharoah Company in full.

Prepare the journal entries to record the transactions listed above on Pharoah Co.’s books. Pharoah Co. uses a perpetual inventory system.

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Answer from: destineepreuss4472

(1) On April 5, purchased merchandise from Pharoah Company for $28,600, terms 4/10, n/30.

Trade Receivable - Shamrock Co. $28600 (debit)

Revenue $28600 (credit)

(2) On April 6, paid freight costs of $580 on merchandise purchased from Pharoah.

No Entry Required

(3) On April 7, purchased equipment on account for $32,000.

No Entry Required

(4) On April 8, returned $3,500 of April 5 merchandise to Pharoah Company.

Revenue $3500 (debit)

Trade Receivable-Shamrock Co. $3500 (credit)

(5) On April 15, paid the amount due to Pharoah Company in full.

Bank $25100 (debit)

Trade Receivable - Shamrock Co. $ 25100 (credit)

Explanation:

Note that the question required us to prepare the journal entries to record the transactions Pharoah Co.’s books.

Therefore only transactions in Shamrock that concern Pharoah Co are considered

(1) On April 5, purchased merchandise from Pharoah Company for $28,600, terms 4/10, n/30.

Pharoah Co. Recognises Revenue and an Asset Trade Receivable - Shamrock Co.

(2) On April 6, paid freight costs of $580 on merchandise purchased from Pharoah.

No Entry Required. Freight Costs are born by Shamrock and would be accounted as part of Merchandise costs in their records.

(3) On April 7, purchased equipment on account for $32,000.

No Entry Required. The Equipment is an Asset in Shamrock. This transaction does not concern Pharoah.

(4) On April 8, returned $3,500 of April 5 merchandise to Pharoah Company.

De-recognise revenue ie Returns Inwards for Merchandise returned and also derecognise the asset Trade Receivable - Shamrock Co.

(5) On April 15, paid the amount due to Pharoah Company in full.

Recognise the asset Cash to depict flow of economic benefits in Pharoah and derecognise the asset Trade Receivable - Shamrock Co.

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Answer from: Quest

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This information relates to Shamrock Co.

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