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Q4-3E

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Financial & Managerial Accounting
Found in: Page 209
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Prepare journal entries to record the following transactions for a retail store. The company uses a perpetual inventory system and the gross method.

Apr. 2 Purchased $4,600 of merchandise from Lyon Company with credit terms of 2∕15, n∕60, invoice dated April 2, and FOB shipping point.

3 Paid $300 cash for shipping charges on the April 2 purchase.

4 Returned to Lyon Company unacceptable merchandise that had an invoice price of $600.

17 Sent a check to Lyon Company for the April 2 purchase, net of the discount and the returned merchandise.

18 Purchased $8,500 of merchandise from Frist Corp. with credit terms of 1∕10, n∕30, invoice dated April 18, and FOB destination.

21 After negotiations, received from Frist a $500 allowance toward the $8,500 owed on the April 18 purchase.

28 Sent check to Frist paying for the April 18 purchase, net of the allowance and the discount.

Answer

Both credit and debit sides of the journal amount to $26,500 each.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Definition of Purchase Returns

The goods returned by the buyer to the supplier due to the wrong product or any defect are reported as purchase returns.

Step 2: Journal entries

Date

Accounts and Explanation

Debit $

Credit $

2 April

Merchandise inventory

$4,600

Account payable – Lyon

$4,600

3 April

Freight in

300

Cash

300

4 April

Account payable – Lyon

600

Inventory

600

17 April

Account payable – Lyon

4,000

Discount received

80

Cash

3,920

18 April

Merchandise inventory

8,500

Account payable – Frist Corp.

8,500

21 April

Account payable

500

Allowance inventory

500

28 April

Account payable – Frist Corp.

8,000

Discount received

80

Cash

7,920

$26,500

$26,500

Most popular questions for Business-studies Textbooks

Prepare journal entries to record the following merchandising transactions of Menards, which applies the perpetual inventory system and gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on July 3 in Accounts Payable—OLB.)

July 3 Purchased merchandise from OLB Corp. for $15,000 under credit terms of 1∕10, n∕30, FOB destination, invoice dated July 3.

7 Sold merchandise to Brill Co. for $11,500 under credit terms of 2∕10, n∕60, FOB destination, invoice dated July 7. The merchandise had cost $7,750.

10 Purchased merchandise from Rupert Co. for $14,200 under credit terms of 1∕10, n∕45, FOB shipping point, invoice dated July 10.

11 Paid $300 cash for shipping charges related to the July 7 sale to Brill Co.

12 Brill returned merchandise from the July 7 sale that had cost Menards $1,450 and been sold for $2,000. The merchandise was restored to inventory.

14 After negotiations with Rupert Co. concerning problems with the merchandise purchased on July 10, Menards received a credit memorandum from Rupert granting a price reduction of $1,200.

15 At OLB’s request, Menards paid $200 cash for freight charges on the July 3 purchase, reducing the amount owed to OLB.

17 Received balance due from Brill Co. for the July 7 sale less the return on July 12.

20 Paid the amount due Rupert Co. for the July 10 purchase less the price reduction granted on July 14.

21 Sold merchandise to Brown for $11,000 under credit terms of 1∕10, n∕30, FOB shipping point, invoice dated July 21. The merchandise had cost $7,000.

24 Brown requested a price reduction on the July 21 sale because the merchandise did not meet specifications. Menards sent Brown a credit memorandum for $1,000 toward the $11,000 invoice to resolve the issue.

30 Received Brown’s cash payment for the amount due from the July 21 sale less the price allowance from July 24.

31 Paid OLB Corp. the amount due from the July 3 purchase.

Prepare journal entries to record the following merchandising transactions of IKEA, which uses the perpetual inventory system and gross method. (Hint: It will help to identify each receivable and payable; for example, record the purchase on May 2 in Accounts Payable—Havel.)

May 2 Purchased merchandise from Havel Co. for $10,000 under credit terms of 1∕15, n∕30, FOB shipping point, invoice dated May 2.

4 Sold merchandise to Rath Co. for $11,000 under credit terms of 2∕10, n∕60, FOB shipping point, invoice dated May 4. The merchandise had cost $5,600.

5 Paid $250 cash for freight charges on the purchase of May 2.

9 Sold merchandise that had cost $2,000 for $2,500 cash.

10 Purchased merchandise from Duke Co. for $3,650 under credit terms of 2∕15, n∕60, FOB destination, invoice dated May 10.

12 Received a $650 credit memorandum from Duke Co. for the return of a portion of the merchandise purchased on May 10.

14 Received the balance due from Rath Co. for the invoice dated May 4, net of the discount.

17 Paid the balance due to Havel Co. within the discount period.

20 Sold merchandise that cost $1,450 to Tamer Co. for $2,800 under credit terms of 2∕15, n∕60, FOB shipping point, invoice dated May 20.

22 Issued a $300 credit memorandum to Tamer Co. for an allowance on goods sold on May 20. 4

25 Paid Duke Co. the balance due, net of the discount.

30 Received the balance due from Tamer Co. for the invoice dated May 20, net of discount and allowance.

31 Sold merchandise that cost $3,600 to Rath Co. for $7,200 under credit terms of 2∕10, n∕60, FOB shipping point, invoice dated May 31.

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