Explanation a. Record the purchase of merchandise inventory on account. Date Account Title and Explanation Post Ref. Debit ($) Credit ($) Merchandise Inventory 47,520 Accounts Payable 47,520 (1) (To record purchases of inventory on account after discount) Table (1) Working Note: Calculate the amount of accounts payable. Purchases = $48,000 Discount Percentage = 1% Amount of accounts payable } = Purchases − Discount = Purchases − ( Purchases × 1 % ) = $48,000 – ( $ 48 , 000 × 1 % ) = $48,000 − $ 480 = $ 47 , 520 (1) Merchandise inventory is an asset and it is increased by $47,520. Therefore, debit inventory account with $47,520. Accounts payable is a liability and it is increased by $47,520. Therefore, credit accounts payable account with $47,520. b. Record the journal entry for the due amount paid. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) Accounts Payable 47,520 Cash 47,520 (To record paying cash on purchases after discounts and returns) Table (2) Accounts payable is a liability and it is decreased by $47,520. Therefore, debit accounts payable account with $47,520. Cash is an asset and it is decreased by $47,520. Therefore, credit cash account with $47,520. c. Record the journal entry for purchase returned for damaged goods. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) Accounts Receivable 7,425 Merchandise Inventory 7,425 (2) (To record the purchases return) Table (3) Working Note: Calculate the amount of merchandise inventory returned

13th Edition

ISBN: 9781285866307

Author: Carl Warren, James M. Reeve, Jonathan Duchac

Publisher: Cengage Learning

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Chapter 5, Problem 5.7EX

To determine

Purchases is an activity of acquiring the merchandise inventory of a business.

To Record: The purchase of merchandise inventory on account under the terms of 1/10, n/30.

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Chapter 5, Problem 5.6EX

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Purchase-Related Transactions Journalize entries for the following related transactions of Manville Heating & Air Company: a. Purchased $22,000 of merchandise from Wright Co. on account, terms 2/10, n/30. Merchandise Inventory Accounts Payable-Wright Co. b. Paid the amount owed on the invoice within the discount period. Accounts Payable-Wright Co. Cash c. Discovered that $4,400 of the merchandise purchased in (a) was defective and returned items, receiving credit. Accounts Receivable-Wright Co. Merchandise Inventory d. Purchased $3,400 of merchandise from Wright Co. on account, terms n/30. Merchandise Inventory Accounts Payable-Wright Co. e. Received a refund from Wright Co. for return in (c) less the purchase in (d). Sales Returns and Allowances

Purchase-Related Transactions Journalize entries for the following related transactions of Manville Heating & Air Company: a. Purchased $28,000 of merchandise from Wright Co. on account, terms 2/10, n/30. Merchandise Inventory Accounts Payable-Wright Co. b. Paid the amount owed on the invoice within the discount period. Cash Sales Discounts c. Discovered that $5,600 of the merchandise purchased in (a) was defective and returned items, receiving credit. d. Purchased $4,600 of merchandise from Wright Co. on account, terms n/30. Merchandise Inventory Accounts Payable-Wright Co. e. Received a refund from Wright Co. for return in (c) less the purchase in (d). Cash Accounts Payable-Wright Co.

Purchase-Related Transactions Journalize entries for the following related transactions of Lilly Heating & Air Company: Purchased $30,000 of merchandise from Schell Co. on account, terms 1/10, n/30. Paid the amount owed on the invoice within the discount period. Discovered that $6,000 before purchases discount of the merchandise was defective and returned items, receiving credit. Purchased $4,800 of merchandise from Schell Co. on account, terms n/30. Received a check for the balance owed from the return in (c), after deducting for the purchase in (d). a. Inventory fill in the blank 2 Accounts Payable-Schell Co. fill in the blank 4 b. Accounts Payable-Schell Co. fill in the blank 6 Cash fill in the blank 8 c. Accounts Payable-Schell Co. fill in the blank 10 Inventory fill in the blank 12 d. Inventory fill in the blank 14 Accounts Payable-Schell Co. fill in the blank 16 e. Cash fill in the blank 18 Accounts…

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Purchases is an activity of acquiring the merchandise inventory of a business. To Record: The purchase of merchandise inventory on account under the terms of 1/10, n/30.

Solution Summary: The author explains how to record the purchase of merchandise inventory on account under the terms of 1/10,n/30.