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Q20E

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Horngren'S Financial And Managerial Accounting
Found in: Page 300

Short Answer

Howie Jewelers had the following purchase transactions. Journalize all necessary transactions. Explanations are not required.

Jun. 20 Purchased inventory of $5,100 on account from Sanders Diamonds, a jewelry importer. Terms were 2/15, n/45, FOB shipping point.

20 Paid freight charges, $400.

Jul. 4 Returned $600 of inventory to Sanders.

14 Paid Sanders Diamonds, less return.

16 Purchased inventory of $3,500 on account from Southboro Diamonds, a jewelry importer. Terms were 2/10, n/EOM, FOB destination.

18 Received a $300 allowance from Southboro Diamonds for damaged but usable goods.

24 Paid Southboro Diamonds, less allowance, and discount.

The total of debits and credits is $18,036.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Purchase Transactions

In accounting, purchase transactions refer to the events that bring the goods in. Under this process, a business concern acquires goods from the supplier to resell them to generate profits.

Step 2: Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Jun 20

Merchandise inventory

5,100

Accounts payable

5,100

Jun 20

Freight expenses

400

Cash

400

Jul 4

Accounts payable

600

Merchandise inventory

600

Jul 14

Accounts payable (5100-600)

4,500

Cash

4,500

Jul 16

Merchandise inventory

3,500

Accounts payable

3,500

Jul 18

Accounts payable

300

Merchandise inventory

300

Jul 24

Accounts payable (3200-3200*2%)

3,136

Cash

3,136

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