Q. 3 Prepare journal entries to record the following merchandising transactions for both the seller (BMX) and buyer (Sanuk). (20) May 4 BMX sold $1,500 of merchandise on account to Sanuk, terms FOB shipping point, n/45, invoice dated May 4. The cost of

Here are the journal entries to record the merchandising transactions for both the seller (BMX) and the buyer (Sanuk) for May. Each transaction will be recorded in the appropriate accounts according to the situation.

### For BMX (Seller)

#### May 4
1. **Sale of Merchandise on Account**
   ```
   Accounts Receivable - Sanuk                   1,500
       Sales Revenue                                        1,500
   Cost of Goods Sold                                 900
       Merchandise Inventory                             900
   ```

#### May 6
2. **Transportation Charges Paid by Sanuk (Not recorded by BMX, as it is the buyer's cost)**
   (No entry for BMX regarding the transportation charges.)

#### May 8
3. **Sale of Merchandise on Account**
   ```
   Accounts Receivable - Sanuk                   1,000
       Sales Revenue                                        1,000
   Cost of Goods Sold                                 700
       Merchandise Inventory                             700
   ```

#### May 10
4. **Transportation Costs Paid by BMX**
   ```
   Delivery Expense                                          50
       Cash                                                       50
   ```

#### May 16
5. **Issuance of Credit Memorandum for Returns**
   ```
   Sales Returns and Allowances                     200
       Accounts Receivable - Sanuk                     200
   Cost of Goods Sold                                 140
       Merchandise Inventory                             140
   ```

#### May 18
6. **Receipt of Payment from Sanuk for May 8 Purchase**
   ```
   Cash                                                            800    (1,000 - 200 for return)
       Accounts Receivable - Sanuk                     800
   ```

#### May 21
7. **Sale of Merchandise on Account with Prepaid Transportation Charges**
   ```
   Accounts Receivable - Sanuk                   2,500   (2,400 + 100 transportation)
       Sales Revenue                                         2,400
       Freight-Out                                              100
   Cost of Goods Sold                                1,440
       Merchandise Inventory                             1,440
   ```

#### May 31
8. **Receipt of Payment from Sanuk for May 21 Purchase (Less Discount)**
   ```
   Cash                                                          2,450       (2,500 - 2% discount on $2,500 = $50)
   Sale Discounts                                           50
       Accounts Receivable - Sanuk                     2,500
   ```

---

### For Sanuk (Buyer)

#### May 4
1. **Purchase of Merchandise on Account**
   ```
   Merchandise Inventory                              1,500
       Accounts Payable - BMX                             1,500
   ```

#### May 6
2. **Payment of Transportation Charges**
   ```
   Merchandise Inventory                                30
       Cash                                                        30
   ```

#### May 8
3. **Purchase of Merchandise on Account**
   ```
   Merchandise Inventory                              1,000
       Accounts Payable - BMX                             1,000
   ```

#### May 10
4. **Payment of Transportation Costs (Related to Purchase)**
   ```
   Freight-In                                             50
       Cash                                                       50
   ```

#### May 16
5. **Return of Merchandise**
   ```
   Accounts Payable - BMX                                 200
       Merchandise Inventory                               200
   ```

#### May 18
6. **Payment to BMX for May 8 Purchase, Less Returns**
   ```
   Cash                                                          800     (1,000 - 200 return)
       Accounts Payable - BMX                             800
   ```

#### May 21
7. **Purchase of Merchandise on Account with Freight Charged**
   ```
   Merchandise Inventory                              2,500     (2,400 + 100 freight)
       Accounts Payable - BMX                             2,500
   ```

#### May 31
8. **Payment to BMX for May 21 Purchase (Less Discount)**
   ```
   Accounts Payable - BMX                             2,500
       Cash                                                         2,450
       Purchase Discounts                                  50
   ```

These journal entries reflect the transactions between BMX and Sanuk in accordance with accounting principles for merchandising and recognize the impact of sales returns, discounts, and transportation costs on both the buyer and seller's accounts.

Update (2024-12-21):
To record the transactions for both the seller (BMX) and the buyer (Sanuk), we need to prepare journal entries based on the details provided. Here are the journal entries for each transaction:

### BMX (Seller) Journal Entries

**May 4**  
**Transaction:** Sold merchandise on account to Sanuk  
```plaintext
Accounts Receivable - Sanuk       1,500  
   Sales Revenue                                     1,500  
Cost of Goods Sold                      900  
   Merchandise Inventory                       900  
```

**May 6**  
**Transaction:** Recorded payment of transportation charges by Sanuk  
(No entry required since transportation was paid by the buyer.)

**May 8**  
**Transaction:** Sold merchandise on account to Sanuk  
```plaintext
Accounts Receivable - Sanuk        1,000  
   Sales Revenue                                    1,000  
Cost of Goods Sold                       700  
   Merchandise Inventory                       700  
```

**May 10**  
**Transaction:** Paid transportation costs for delivery of merchandise to Sanuk  
```plaintext
Transportation Expense               50  
   Cash                                                  50  
```

**May 16**  
**Transaction:** Issued a credit memorandum for the returned merchandise  
```plaintext
Sales Returns and Allowances      200  
   Accounts Receivable - Sanuk                200  
Cost of Goods Sold                        140  
   Merchandise Inventory                   140  
```

**May 18**  
**Transaction:** Received payment from Sanuk for the purchase on May 8  
```plaintext
Cash                                              800  
   Accounts Receivable - Sanuk                800  
```

**May 21**  
**Transaction:** Sold merchandise on account to Sanuk, with freight prepaid  
```plaintext
Accounts Receivable - Sanuk       2,500  
   Sales Revenue                                    2,400  
   Freight-Out                                             100  
Cost of Goods Sold                      1,440  
   Merchandise Inventory                       1,440  
```

**May 31**  
**Transaction:** Received payment from Sanuk for the purchase on May 21, less discount  
```plaintext
Cash                                             2,450  
Sales Discounts Forfeited               50  
   Accounts Receivable - Sanuk                2,500  
```

### Sanuk (Buyer) Journal Entries

**May 4**  
**Transaction:** Purchased merchandise on account from BMX  
```plaintext
Merchandise Inventory                  1,500  
   Accounts Payable - BMX                      1,500  
```

**May 6**  
**Transaction:** Paid transportation charges on May 4 purchase  
```plaintext
Merchandise Inventory                   30  
   Cash                                                 30  
```

**May 8**  
**Transaction:** Purchased merchandise on account from BMX  
```plaintext
Merchandise Inventory                  1,000  
   Accounts Payable - BMX                      1,000  
```

**May 10**  
**Transaction:** Paid transportation costs on May 8 purchase  
```plaintext
Transportation Expense               50  
   Cash                                                 50  
```

**May 16**  
**Transaction:** Returned merchandise to BMX  
```plaintext
Accounts Payable - BMX            200  
   Merchandise Inventory                       200  
```

**May 18**  
**Transaction:** Paid for May 8 purchase  
```plaintext
Cash                                             800  
   Accounts Payable - BMX                      800  
```

**May 21**  
**Transaction:** Purchased additional merchandise on account from BMX  
```plaintext
Merchandise Inventory                  2,500  
   Accounts Payable - BMX                      2,500  
```

**May 31**  
**Transaction:** Paid for May 21 purchase, less discount  
```plaintext
Accounts Payable - BMX              2,500  
   Cash                                                 2,450  
   Purchase Discounts                               50  
```

These entries denote the financial impact of each transaction on both BMX (the seller) and Sanuk (the buyer), reflecting sales, costs of goods sold, and transportation costs as necessary.