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: 9781337816045

Author: WARREN

Publisher: CENGAGE L

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 5.7EX

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.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 5, Problem 5.6EX

Chapter 5, Problem 5.8EX

Students have asked these similar questions

What is the degree of operating leverage

Solve this account problem

What is this company's manufacturing cycle efficiency??

Chapter 5 Solutions

FINANCIAL AND MANAGERIAL ACCOUNTING

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

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. 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.