Explanation Record the purchase of merchandise inventory on account. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) June 3 Purchases 4,500 Accounts Payable 4,500 (To record purchases of inventory on account) Table (1) Purchases account is an expense and it is decreased the equity value by $4,500. Therefore, debit purchase account with $4,500. Accounts payable is a liability and it is increased by $4,500. Therefore, credit accounts payable account with $4,500. Record the journal entry for freight charges paid. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) June 4 Freight-In 75 Cash 75 (To record the payment of freight charges) Table (2) Freight-In account is an expense and it is decreased the equity value by $75. Therefore, debit freight-in account with $75. Cash is an asset and it is decreased by $75. Therefore, credit cash account with $75. Record the journal entry for cash purchase. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) June 4 Purchases 1,300 Cash 1,300 (To record the payment against cash purchase) Table (3) Purchases account is an expense and it is decreased the equity value by $1,300. Therefore, debit purchase account with $1,300. Cash is an asset and it is decreased by $1,300. Therefore, credit cash account with $1,300. Record the journal entry for purchase returned. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) June 6 Accounts Payable 500 Purchase Returns and Allowances 500 (To record the purchases return) Table (4) Accounts payable is a liability and it is decreased by $500. Therefore, debit accounts payable account with $500. Purchases returns and allowances account is an expense and it is increased the equity value by $500. Therefore, credit purchases returns and allowances account with $500. Record the journal entry for the sale of inventory on account. Date Accounts and Explanation Debit ($) Credit ($) June 8 Accounts Receivable 3,800 To Sales Revenue 3,800 (To record the sale of inventory on account) Table (5) Accounts Receivable is an asset and it is increased by $3,800. Therefore, debit account receivable with $3,800. Sales revenue is revenue and it increases the value of equity by $3,800. Therefore, credit sales revenue with $3,800. Record the purchase of merchandise inventory on account. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) June 9 Purchases 4,700 Accounts Payable 4,700 (To record purchases of inventory on account) Table (6) Purchases account is an expense and it is decreased the equity value by $4,700. Therefore, debit purchase account with $4,700. Accounts payable is a liability and it is increased by $4,700. Therefore, credit accounts payable account with $4,700. Record the journal entry for the due amount paid. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) June 10 Accounts Payable 4,000 (1) Purchase discount 120 (2) Cash 3,880 (3) (To record paying cash on purchases after discounts and returns) Table (7) Working Notes: Calculate accounts payable amount. Purchases = $4,500 Purchases returns = $500 Accounts payable = Purchases – Purchase returns = $ 4 , 500 – $ 500 = $ 4 , 000 (1) Calculate purchase discount / inventory. Net accounts payable = $4,000 (1) Discount percentage = 3% Purchase discount = $4,000 × 3 100 = $120 (2) Calculate cash paid. Accounts payable = $4,000 (1) Purchase discount / Inventory = $120 (2) Cash paid = Accounts payable, net – Purchase discount = $4,000 – $120 = $3,880 (3) Accounts payable is a liability and it is decreased by $4,000. Therefore, debit accounts payable account with $4,000. Merchandise Inventory is an asset and it is decreased by $120. Therefore, credit inventory account with $120. Cash is an asset and it is decreased by $3,880. Therefore, credit cash account with $3,880. Record the journal entry for the balance amount received. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) June 12 Cash 3,686 (5) Sales Discounts 114 (4) Accounts Receivable 3,800 (To record cash received and discounts allowed) Table (8) Working Notes: Calculate sales discount amount. Accounts receivable, net = $3,800 Sales discount percentage = 3% Sales discount = $3,800 × 3 100 = $114 (4) Calculate cash received. Accounts receivable, net = $3,800 Sales discount = $114 (4) Cash received = Accounts receivable, net – Sales discount = $3,800 – $114 = $3,686 (5) Cash is an asset and it is increased by $3,686. Therefore, debit cash account with $3,686. Sales Discounts is a contra revenue account and would have a debit balance. Therefore, debit sales discounts account with $114. Accounts Receivable is an asset and it is decreased by $3,800. Therefore, credit account receivable with $3,800. Record the journal entry for allowance received. Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) June 13 Accounts Payable 500 Purchase Returns and Allowances 500 (To record the allowance received) Table (9) Accounts payable is a liability and it is decreased by $500

Horngren's Financial & Managerial Accounting (5th Edition)

5th Edition

ISBN: 9780133866292

Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura

Publisher: PEARSON

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Chapter 5, Problem 5.43BP

To determine

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

Sales is an activity of selling the merchandise inventory of a business.

To Record: The purchase and sales transactions of Company D during June 2016.

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Chapter 5, Problem 5.42BP

Chapter 5, Problem 5.44BP

Chapter 5 Solutions

Horngren's Financial & Managerial Accounting (5th Edition)

Ch. 5 - Which account does a merchandiser use that a...Ch. 5 - The two main inventory accounting systems are the...Ch. 5 - The journal entry for the purchase of inventory on...Ch. 5 - JC Manufacturing purchase d inventory for 5,300...Ch. 5 - Prob. 5QC Ch. 5 - Suppose Daves Discounts Merchandise Inventory...Ch. 5 - Which of the following accounts would be closed at...Ch. 5 - What is the order of the subtotals that appear on...Ch. 5 - Prob. 9QC Ch. 5 - The journal entry for the purchase of inventory on...

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Purchases is an activity of acquiring the merchandise inventory of a business. Sales is an activity of selling the merchandise inventory of a business. To Record: The purchase and sales transactions of Company D during June 2016.

Solution Summary: The author explains how to record the purchase and sales transactions of Company D during June 2016.