Spare Parts was organized on May 1, 2011, and made its first purchase of merchandise on May 3. The purchase was for 1,900 units at a price of $9 per unit. On May 5, Spare Parts sold 1,140 of the units for $13 per unit to DeSoto Co. Terms of the sale were 2/10, n/60. a. On May 7, DeSoto returns 399 units because they did not fit the customer's needs. Spare Parts restores the units to its inventory. b. On May 8, DeSoto discovers that 95 units are damaged but are still of some use and, therefore, keeps the units. Spare Parts sends DeSoto a credit memorandum for $475 to compensate for the damage. c. On May 15, DeSoto discovers that 114 units are the wrong color. DeSoto keeps 68 of these units because Spare Parts sends a $134 credit memorandum to compensate. DeSoto returns the remaining 46 units to Spare Parts. Spare Parts restores the 46 returned units to its inventory. Prepare the appropriate journal entries for DeSoto Co. to record the May 5 purchase and each of the three separate transactions a through c. DeSoto is a retailer that uses a perpetual inventory system and purchases these units for resale.

Spare Parts was organized on May 1, 2011, and made its first purchase of merchandise on May 3. The purchase was for 1,900 units at a price of $9 per unit. On May 5, Spare Parts sold 1,140 of the units for $13 per unit to DeSoto Co. Terms of the sale were 2/10, n/60.

    

a.	On May 7, DeSoto returns 399 units because they did not fit the customer's needs. Spare Parts restores the units to its inventory.
b.	On May 8, DeSoto discovers that 95 units are damaged but are still of some use and, therefore, keeps the units. Spare Parts sends DeSoto a credit memorandum for $475 to compensate for the damage.
c.	On May 15, DeSoto discovers that 114 units are the wrong color. DeSoto keeps 68 of these units because Spare Parts sends a $134 credit memorandum to compensate. DeSoto returns the remaining 46 units to Spare Parts. Spare Parts restores the 46 returned units to its inventory.

     

Prepare the appropriate journal entries for DeSoto Co. to record the May 5 purchase and each of the three separate transactions a through c. DeSoto is a retailer that uses a perpetual inventory system and purchases these units for resale.

 

Explanation:

May 5:

Purchased merchandise on credit (1,140 × $13) = $14,820.

May 7:

Returned unwanted merchandise (399 × $13) = $5,187.

May 15:

To record return of merchandise (46 × $13) = $598.