Information related to Pagnucci Co. is presented below.
1. On April 5, purchased merchandise from Mockingbird Company for $20,000 terms 2/10, net/30, FOB shipping point.
2. On April 6 paid freight costs of $500 on merchandise purchased from Mockingbird.
3. On April 7, purchased equipment on account for $29,000.
4. On April 8, returned damaged merchandise to Mockingbird Company and was granted a $3,000 credit for returned merchandise.
5. On April 15 paid the amount due to Mockingbird Company in full.
(a) Prepare the journal entries to record these transactions on the books of Pagnucci Co. under a perpetual inventory system.
(b) On April 20, Pagnucci sold 60% of the goods purchased from Mockingbird. What amount would they record as cost of goods sold?
(c) How would the April 6 entry be different if the $500 was paid to ship goods to a customer (rather than for shipping costs for goods purchased)?
(d) Assume that Pagnucci Co. paid the balance due to Mockingbird Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

c) The difference is that the $500 will not be included in the cost of of the inventory purchase. Instead, it will be treated as a selling expense (freight-out).

d) The Journal Entry to record the payment on May 4 instead of April 15 is as follows:

May 4 Debit Accounts Payable (Mockingbird Company) $17,000

Credit Cash $17,000

To record the payment on account in full.

Data Analysis:

April 5 Inventory $20,000 Accounts Payable (Mockingbird Company) $20,000 terms 2/10, net/30, FOB shipping point.

April 6 Freight-in $500 Cash $500

April 7 Equipment $29,000 Accounts Payable $29,000

April 8 Accounts Payable (Mockingbird Company) $3,000 Inventory $3,000

April 15 Accounts Payable (Mockingbird Company) $17,000 Cash $16,660 Cash Discount $340

Cost of goods available for sale:

Inventory purchase = $20,000

Freight-in 500

Inventory return = (3,000)

Cost of goods available $17,500

Cost of goods sold (60%) $10,500

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