Problem 1: Prepare the journal entries to record the following transactions on Benson Company's books using a perpetual inventory system.
(a) On March 2, Benson Company sold $800,000 of merchandise to Edgebrook Company, terms 2/10, n/30. The cost of the merchandise sold was $620,000.
(b) On March 6, Edgebrook Company returned $120,000 of the merchandise purchased on March 2 because it was defective. The cost of the returned merchandise was $90,000.
(c) On March 12, Benson Company received the balance due from Edgebrook Company.
Problem 2: In its first month of operation, Marquette Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 150 units for $8. At the end of the month, 200 units remained.
Compute the amount of phantom profit that would result if the company used FIFO rather than LIFO. Explain why this amount is referred to as phantom profit.The company uses the periodic method.