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Q29E

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Horngren'S Financial And Managerial Accounting
Found in: Page 303

Short Answer

Lawrence Appliances had the following purchase transactions. Journalize all necessary transactions using the periodic inventory system. Explanations are not required.

Sep. 4 Purchased inventory of $6,900 on account from Max Appliance Wholesale, an appliance wholesaler. Terms were 3/15, n/30, FOB shipping point.

4 Paid freight charges, $480.

10 Returned $300 of inventory to Max.

17 Paid Max Appliance Wholesale, less return, and discount.

20 Purchased inventory of $3,900 from MY Appliance, an appliance wholesaler. Terms were 1/10, n/45, FOB destination.

22 Received a $400 allowance from MY Appliance for damaged but usable goods.

29 Paid MY Appliance, less allowance and discount.

The total of debits and credits is $22,080.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Raw Materials 

In cost accounting, raw material denotes the goods required to be processed before selling them to the consumers. Raw materials pass through the production process and appear as finished goods.

Step 2: Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Sep 4

Purchases

6,900

Accounts payable

6,900

Sept 4

Freight in

480

Cash

480

Sep 10

Accounts payable

300

Purchase returns

300

Sep 17

Accounts payable (6900-300)

6,600

Purchase discount (6600*3%)

198

Cash

6402

Sep 20

Purchases

3,900

Accounts payable

3,900

Sep 22

Accounts payable

400

Purchase allowance

400

Sep 29

Accounts payable (3900-400)

3,500

Purchase discount (3500*1%)

35

Cash

3,465

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