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

CengageNOWv2, 2 terms Printed Access Card for Warren?s Financial & Managerial Accounting, 13th, 13th Edition

13th Edition

ISBN: 9781305267831

Author: WARREN, Reeve

Publisher: Cengage

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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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CengageNOWv2, 2 terms Printed Access Card for Warren?s Financial & Managerial Accounting, 13th, 13th Edition

Ch. 5 - Prob. 1DQ Ch. 5 - Prob. 2DQ Ch. 5 - The credit period during which the buyer of...Ch. 5 - What is the meaning of (A) 1/15, n/60; (B) n/30;...Ch. 5 - How are sales to customers using .MasterCard and...Ch. 5 - Prob. 6DQ Ch. 5 - Prob. 7DQ Ch. 5 - Name three accounts that would normally appear in...Ch. 5 - Audio Outfitter Inc., which uses a perpetual...Ch. 5 - Prob. 10DQ

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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.