Chapter 6, Problem 6.18E

Determining the Effects of Credit Sales, Sales Discounts, and Sales Returns and Allowances on Income Statement Categories

Rockland Shoe Company records Sales Returns and Allowances and Sales Discounts as contra- revenues. Complete the following table, indicating the amount and direction of effect (+ for increase − for decrease, and NE for no effect) of each transaction on each item reported in Rockland’s income statement prepared for internal use. Be sure to total the effects.

July 12		Rockland sold merchandise to Kristina Zee at its factory store. Kristina paid for the $300 purchase in cash. The goods cost Rockland $160.
15		Sold merchandise to Shoe Express at a selling price of $5,000, with terms 3/10, n/30. Rockland’s cost was $3,000.
	20		Collected cash due from Shoe Express.
	21.		Sold merchandise to Fleet Foot Co. at a selling price of $2,000, with terms 2/10, n/30. Rockland’s cost was $1,200.
	23		Fleet Foot Co. returned $ 1,000 of shoes and promised to pay for the remaining goods in August. The returned shoes were in perfect condition and had cost Rockland $600.