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

16th Edition

ISBN: 9781323118047

Author: Pearson

Publisher: PEARSON C

See similar textbooks

Concept explainers

The Effect Of Prepaid Taxes On Assets And Liabilities

Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can resu…

Final Accounts

Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.

Ledger Posting

A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the a…

Trial Balance and Final Accounts

In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately…

Adjustment Entries

At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial repor…

Videos

Question

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.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 5, Problem 5.42BP

Chapter 5, Problem 5.44BP

Chapter 5 Solutions

ACC 201/202 MYACCLAB E-TEXT ONLY >I<

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...

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

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.