PE 6-5B Transactions for buyer and seller

SPA Co. sold merchandise to Boyd Co. on account, $25,000, terms FOB shipping point,
2/10, n/30. The cost of the merchandise sold is $16,000. SPA Co. paid freight of $675
and later received the amount due within the discount period. Journalize SPA Co.’s and
Boyd Co.’s entries for the payment of the amount due.

Answer:
SPA Co. journal entries:
      Cash ($25,000 – $500 + $675)............................................... 25,175
      Sales Discounts ($25,000 × 2%)........................................... 500
                                  Accounts Receivable—Boyd Co. ($25,000 + $675)....... 25,675

Boyd Co. journal entries:
      Accounts Payable—SPA Co. ($25,000 + $675) ................... 25,675
                                      Merchandise Inventory ($25,000 × 2%).......................... 500
                                      Cash ($25,000 – $500 + $675) .................................. 25,175