NewTech Medical Devices is a medical devices wholesaler that commenced business on June 1, 2019. NewTech Medical Devices purchases merchandise for cash and on open account. In June 2019, NewTech Medical Devices engaged in the following purchasing and cash payment activities:
INSTRUCTIONS
Journalize the transactions in a general journal. Use 1 as the journal page number.
Analyze: What was the amount of trade discounts received on the June 15 purchase from Park Research?
Record the transaction into general journal.
Explanation of Solution
Journalizing:
Journalizing refers to that process in which the transactions of an organization are recorded in a sequence. Based on the recorded entries, the accounts are posted to the relevant ledger accounts.
The general journal recording the transactions is as follows:
Recording the purchases on cash:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
June 1, 2019 | Purchases | 4,500 | ||
Cash | 4,500 | |||
(to record the inventory purchased on cash) |
Table (1)
- • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
- • The cash account is an asset account and account balance for cash is decreasing. Therefore, it is credited.
Recording the purchases on credit:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
June 3, 2019 | Purchases | 1,700 | ||
Accounts payable/Company BC | 1,700 | |||
(to record the inventory purchased on account with terms2/10, n/30) |
Table (2)
- • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
- • Since, the accounts payable is liability and account balance is increasing. Therefore, it is credited.
Recording the purchases on credit including freight charges:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
June 5, 2019 | Purchases | 5,850 | ||
Freight In | 110 | |||
Accounts payable/Company NC | 5,960 | |||
(to record the inventory purchased on account with terms2/10, n/30) |
Table (3)
- • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
- • The freight-in account is debited. This is because the freight-in account is an expense account and it has normal debit balance which is increasing.
- • Accounts payable is liability and balance for accounts payable is increasing. Therefore, it is credited.
Recording the payment made:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
June 9, 2019 | Accounts payable/Company BC | 1,700 | ||
Purchases discounts | 34 | |||
Cash | 1,666 | |||
(to record the payment made and receiving purchases discount) |
Table (4)
- • The accounts payable is liability and the account balance is decreasing. Therefore, accounts payable account is debited.
- • The purchases discount account is a contra expense account. The account has the normal credit balance and its increasing. Therefore, it is credited.
- • The cash account is an asset account and the account balance is decreasing. Therefore, it is credited.
Recording the purchases returned and credit memorandum received:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
June 10, 2019 | Accounts payable/Company NC | 150 | ||
Purchases returns and allowances | 150 | |||
(to record the inventory returned and credit memorandum received) |
Table (5)
- • The accounts payable account is a liability account. The accounts payable account has the normal credit balance and it is decreasing. Therefore, it is debited.
- • The purchase returns and allowances account is contra expenses account. The account has the normal credit balance and increasing. Therefore, it is credited.
Recording the purchases on credit:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
June 11, 2019 | Purchases | 1,680 | ||
Accounts payable/Company BC | 1,680 | |||
(to record the inventory purchased on account with terms2/10, n/30) |
Table (6)
- • The purchases account is debited. This is because the purchase account is an expense account and has normal debit balance which is increasing.
- • Since, the accounts payable is liability and account balance is increasing. Therefore, it is credited.
Recording the payment made:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
June 14, 2019 | Accounts payable/Company NC | 5,810 | ||
Purchases discounts | 114 | |||
Cash | 5,696 | |||
(to record the payment made and receiving purchases discount) |
Table (7)
- • The accounts payable is liability and the account balance is decreasing. Therefore, accounts payable account is debited.
- • The purchases discount account is a contra expense account. The account has the normal credit balance and its increasing. Therefore, it is credited.
- • The cash account is an asset account and the account balance is decreasing. Therefore, it is credited.
Recording the purchases on credit:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
June 15, 2019 | Purchases | 6,256 | ||
Accounts payable/Company PR | 6,256 | |||
(to record the inventory purchased on account with terms n/30) |
Table (8)
- • The purchases account is debited. This is because the purchase account is an expense account and has normal debit balance which is increasing.
- • Since, the accounts payable is liability and account balance is increasing. Therefore, it is credited.
Recording the purchases on cash:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
June 20, 2019 | Purchases | 3,000 | ||
Cash | 3,000 | |||
(to record the inventory purchased on cash) |
Table (9)
- • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
- • The cash account is credited. This is because the cash account is an asset account and account balance is decreasing.
Recording the purchases returned:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
June 25, 2019 | Cash | 280 | ||
Purchases returns and allowances | 280 | |||
(to record the inventory returned and cash received) |
Table (10)
- • The cash account is debited. This is because the cash account is asset account and the account balance is increasing.
- • The purchase returns and allowances account is contra expenses account. The account has the normal credit balance and increasing. Therefore, it is credited.
Recording the purchases on credit including freight charges:
GENERAL JOURNAL | Page 1 | |||
Date | Account Title and Explanation | Post Ref. |
Debit ($) |
Credit ($) |
June 30, 2019 | Purchases | 3,200 | ||
Freight In | 85 | |||
Accounts payable/Company NC | 3,285 | |||
(to record the inventory purchased on account with terms2/10, n/30) |
Table (11)
- • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
- • The freight In account is debited. This is because the freight In account is an expense account and it has normal debit balance which is increasing.
- • Since, the accounts payable is liability and account balance is increasing. Therefore, it is credited.
Calculation of total trade discount:
The formula to calculate the first trade discount is given below,
Substitute $9,200 for list price and 20 for percentage in the above formula.
The formula to calculate the second trade discount is given below,
Substitute $9,200 for list price, $1,840 for first trade discount and 15 for percentage in the above formula.
The formula to calculate the total trade discount is given below,
Substitute $1,840 for first trade discount and $1,104 for second trade discount in the above formula.
The total trade discount should be of $2,944 amount.
Working Note:
Calculation of purchases discount:
The purchases discounts are received by the buyer from the seller. The purchases discounts are received by the buyer for fulfilling the terms of timely payment to seller for purchases. The terms related to paying on timely basis with the company BC were agreed as 2/10, n/30. The terms 2/10, n/30 means the buyer is entitled to receive two percent of purchase discount on the purchases amount. The buyer will be entitled to the discount only if the payment is paid within ten days after provided invoice.
The amount calculated as purchase discount would be $34.
Calculation of purchases discount:
The purchases discounts are received by the buyer from the seller. The purchases discounts are received by the buyer for fulfilling the terms of timely payment to seller for purchases. The terms related to paying on timely basis with the company BC were agreed as 2/10, n/30. The terms 2/10, n/30 means the buyer is entitled to receive two percent of purchase discount on the purchases amount. The buyer will be entitled to the discount only if the payment is paid within ten days after provided invoice.
The amount calculated as purchase discount would be $114.
Calculations for the purchases amount:
The seller provides the trade discount of twenty percent and the fifteen percent on the list price to the buyer. The purchases amount to be recorded by the buyer would be at the invoice price.
The purchases amount that would be calculated is $6,256.
Want to see more full solutions like this?
Chapter 8 Solutions
COLLEGE ACCOUNTING (LL)W/ACCESS>CUSTOM<
- StickUps Company uses a Sales Journal, a Purchases Journal, a Cash Receipts Journal, a Cash Disbursements Journal, and a General Journal. The following transactions occurred during the month of September 2020: Sept. 3 Purchased merchandise on credit for $6,200 from Pacer Co. 7 Sold merchandise on credit to J. Namal for $1,800, subject to a 2% sales discount if paid by the end of the month. Cost, $1,000. 9 Borrowed $5,500 by giving a note to the bank. 13 The owner, Dale Trent, invested an additional $7,000 cash into the business. 18 Sold merchandise to B. Baird for $460 cash. Cost, $280. 22 Paid Pacer Co. $6,200 for the merchandise purchased on September 3. 27 Received $1,764 from J. Namal in payment of the September 7 purchase. 30 Paid salaries of $3,200. Journalize the September transactions that should be recorded in the Cash Receipts Journal, assuming the perpetual inventory system. (Enter transactions in order) Image attached…arrow_forwardReview the following transactions, and prepare any necessary journal entries for Sewing Masters Inc. A. On October 3, Sewing Masters Inc. purchases 800 yards of fabric (Fabric Inventory) at $9.00 per yard from a supplier, on credit. Terms of the purchase are 1/5, n/40 from the invoice date of October 3. B. On October 8, Sewing Masters Inc. purchases 300 more yards of fabric from the same supplier at an increased price of $9.25 per yard, on credit. Terms of the purchase are 5/10, n/20 from the invoice date of October 8. C. On October 18, Sewing Masters pays cash for the amount due to the fabric supplier from the October 8 transaction. D. On October 23, Sewing Masters pays cash for the amount due to the fabric supplier from the October 3 transaction.arrow_forwardReview the following transactions and prepare any necessary journal entries for Tolbert Enterprises. A. On April 7, Tolbert Enterprises contracts with a supplier to purchase 300 water bottles for their merchandise inventory, on credit, for $10 each. Credit terms are 2/10, n/60 from the invoice date of April 7. B. On April 15, Tolbert pays the amount due in cash to the supplier.arrow_forward
- On January 1, Incredible Infants sold goods to Babies Inc. for $1,540, terms 30 days, and received payment on January 18. Which journal would the company use to record this transaction on the 18th? A. sales journal B. purchases journal C. cash receipts journal D. cash disbursements journal E. general journalarrow_forwardReview the following transactions, and prepare any necessary journal entries for Renovation Goods. A. On May 12, Renovation Goods purchases 750 square feet of flooring (Flooring Inventory) at $3.00 per square foot from a supplier, on credit. Terms of the purchase are 2/10, n/30 from the invoice date of May 12. B. On May 15, Renovation Goods purchases 200 measuring tapes (Tape Inventory) at $5.75 per tape from a supplier, on credit. Terms of the purchase are 4/15, n/60 from the invoice date of May 15. C. On May 22, Renovation Goods pays cash for the amount due to the flooring supplier from the May 12 transaction. D. On June 3, Renovation Goods pays cash for the amount due to the tape supplier from the May 15 transaction.arrow_forwardDixon Menswear Shop purchased shirts from Colt Company on May 28, 2019, and received an invoice with a list price amount of 5,000 and payment terms of 2/10, n/30. Dixon uses the net method to record purchases. Dixon should record purchases of: a. 4,000 b. 4,900 c. 5,000 d. 5,100arrow_forward
- A retailer returns $400 worth of inventory to a manufacturer and receives a full refund. What accounts recognize this return before the retailer remits payment to the manufacturer? A. accounts payable, merchandise inventory B. accounts payable, cash C. cash, merchandise inventory D. merchandise inventory, cost of goods soldarrow_forwardA customer just charged $150 of merchandise on the companys own charge card. Which special journal would the company use to record this transaction? A. sales journal B. purchases journal C. cash receipts journal D. cash disbursements journal E. general journalarrow_forwardThe following purchase transactions occurred during October for K-Town Inc.: Record these transactions in the following purchases journal format:arrow_forward
- The following are transactions of Mariano Lerin Bookstore for March 2020: March 2 Purchased merchandise on credit from Digao Publishers; terms 2/10, n/30, FOB destination, P74,000 3 Sold merchandise on credit to Detoya Book Shop, terms 1/10, n/30, FOB shipping point, P10,000 5 Sold merchandise for cash, P70,000 6 Purchased and received merchandise on credit from Easy Bookstore, terms 2/10, n/30, FOB shipping point, P42,000 7 Received freight bill from Supper Express from shipment received on March 6, P570 8 Paid Rent for the month, P7,000 9 Sold merchandise on credit to Recoletos Books, terms 1/10, n/30 FOB destination, P38,000 10 Purchased merchandise from Digao Publishers, terms 2/10, n/30, FOB shipping point, P26,500, including freight costs of P500. 11 Received freight bill from Super Express for sale on March 9, P291. 12 Paid Digao Publishers for purchase of March 2. 13 Received payment in full from Detoya Book Shop's purchase of March 3 14 Paid Easy Bookstore half the amount owed…arrow_forwardThe following are transactions of Mariano Lerin Bookstore for March 2020: March 2 Purchased merchandise on credit from Digao Publishers; terms 2/10, n/30, FOB destination, P74,000 3 Sold merchandise on credit to Detoya Book Shop, terms 1/10, n/30, FOB shipping point, P10,000 5 Sold merchandise for cash, P70,000 6 Purchased and received merchandise on credit from Easy Bookstore, terms 2/10, n/30, FOB shipping point, P42,000 7 Received freight bill from Supper Express from shipment received on March 6, P570 8 Paid Rent for the month, P7,000 9 Sold merchandise on credit to Recoletos Books, terms 1/10, n/30 FOB destination, P38,000 10 Purchased merchandise from Digao Publishers, terms 2/10, n/30, FOB shipping point, P26,500, including freight costs of P500. 11 Received freight bill from Super Express for sale on March 9, P291. 12 Paid Digao Publishers for purchase of March 2. 13 Received payment in full from Detoya Book Shop's purchase of March 3 14 Paid Easy Bookstore half the amount owed…arrow_forwardAfrica Traders is a registered VAT vendor and uses a Perpetual inventory system. Africa Traders buys and sells furniture and equipment to customers for cash or on credit. On 24 February 2021, Africa Traders issued a debit note and returned a portable air conditioner that was purchased on credit from RG wholesalers for a total amount of R5 199 (excluding VAT). Upon the receipts of the debit note and a Portable air conditioner on the 24 February 2021, RG wholesalers issued the following credit note: RG WHOLESALERS 7 Smart Street P O Box 3336 PRETORIA VAT registration number PRETORIA 0001 Tel (012) 429–3931 2277227756 Fax (012) 429–3424 Date: 24 February 2021 CREDIT NOTE No: 5859 To: Africa…arrow_forward
- Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning