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Concept explainers
The following selected transactions were completed by Capers Company during October of the current year:
Instructions
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Prepare journal entries to record the transactions of Company C during the month of October using perpetual inventory system.
Explanation of Solution
Perpetual Inventory System refers to the Merchandise Inventory system that maintains the detailed records of every Merchandise Inventory transactions related to purchases and sales on a continuous basis. It shows the exact on-hand-merchandise inventory at any point of time.
Record the journal entry of Company C during October.
Date | Account Title and Explanation |
Post Ref. |
Debit ($) |
Credit ($) |
October 1 | Merchandise Inventory | 14,448 | ||
Accounts payable | 14,448 | |||
(To record purchase on account) |
Table (1)
- Merchandise Inventory is an asset and it is increased by $14,448. Therefore, debit Merchandise Inventory account with $14,448.
- Accounts payable is a liability and it is increased by $14,448. Therefore, credit accounts payable account with $14,448.
Record the journal entry of Company C.
Date | Account Title and Explanation |
Post Ref. |
Debit ($) |
Credit ($) |
October 3 | Merchandise Inventory | 9,971 | ||
Accounts payable | 9,971 (1) | |||
(To record purchase on account) |
Table (2)
- Merchandise Inventory is an asset and it is increased by $9,971. Therefore, debit Merchandise Inventory account with $9,971.
- Accounts payable is a liability and it is increased by $9,971. Therefore, credit accounts payable account with $9,971.
Working Note (1):
Calculate the amount of accounts payable.
Purchases = $9,950
Discount percentage = 2%
Freight charges = $220
Record the journal entry of Company C.
Date | Account Title and Explanation |
Post Ref. |
Debit ($) |
Credit ($) |
October 4 | Merchandise Inventory | 13,377 | ||
Accounts payable | 13,377 (2) | |||
(To record purchase on account) |
Table (3)
- Merchandise Inventory is an asset and it is increased by $13,377. Therefore, debit Merchandise Inventory account with $13,377.
- Accounts payable is a liability and it is increased by $13,377. Therefore, credit accounts payable account with $13,377.
Working Note (2):
Calculate the amount of accounts payable.
Purchases = $13,650
Discount percentage = 2%
Record the journal entry of Company C.
Date | Account Title and Explanation |
Post Ref. |
Debit ($) |
Credit ($) |
October 6 | Accounts payable | 4,459 (3) | ||
Merchandise Inventory | 4,459 | |||
(To record purchase return) |
Table (4)
- Accounts payable is a liability and it is decreased by $4,459. Therefore, debit accounts payable account with $4,459.
- Merchandise Inventory is an asset and it is decreased by $4,459. Therefore, credit Merchandise Inventory account with $4,459.
Working Note (3):
Calculate the amount of accounts payable.
Purchases return = $4,550
Discount percentage = 2%
Record the journal entry of Company C.
Date | Account Title and Explanation |
Post Ref. |
Debit ($) |
Credit ($) |
October 13 | Accounts payable | 9,971 | ||
Cash | 9,971 | |||
(To record payment made in full settlement less discounts) |
Table (5)
- Accounts payable is a liability and it is decreased by $9,971. Therefore, debit accounts payable account with $9,971.
- Cash is an asset and it is decreased by $9,971. Therefore, credit cash account with $9,971.
Record the journal entry of Company C.
Date | Account Title and Explanation |
Post Ref. |
Debit ($) |
Credit ($) |
October 14 | Accounts payable | 8,918 (4) | ||
Cash | 8,918 | |||
(To record payment made in full settlement less discounts) |
Table (6)
- Accounts payable is a liability and it is decreased by $8,918. Therefore, debit accounts payable account with $8,918.
- Cash is an asset and it is decreased by $8,918. Therefore, credit cash account with $8,918.
Working Note (4):
Calculate the amount of net accounts payable.
Merchandise Inventory = $13,377 (2)
Purchase returns = $4,459 (3)
Record the journal entry of Company C.
Date | Account Title and Explanation |
Post Ref. |
Debit ($) |
Credit ($) |
October 19 | Merchandise Inventory | 27,300 | ||
Accounts payable | 27,300 | |||
(To record purchase on account) |
Table (7)
- Merchandise Inventory is an asset and it is increased by $27,300. Therefore, debit Merchandise Inventory account with $27,300.
- Accounts payable is a liability and it is increased by $27,300. Therefore, credit accounts payable account with $27,300.
Record the journal entry of Company C.
Date | Account Title and Explanation |
Post Ref. |
Debit ($) |
Credit ($) |
October 19 | Merchandise Inventory | 400 | ||
Cash | 400 | |||
(To record freight charges paid) |
Table (8)
- Merchandise Inventory is an asset and it is increased by $27,300. Therefore, debit Merchandise Inventory account with $27,300.
- Cash is an asset and it is decreased by $400. Therefore, credit cash account with $400.
Record the journal entry of Company C.
Date | Account Title and Explanation |
Post Ref. |
Debit ($) |
Credit ($) |
October 20 | Merchandise Inventory | 21,780 | ||
Accounts payable | 21,780 (5) | |||
(To record purchase on account) |
Table (9)
- Merchandise Inventory is an asset and it is increased by $21,780. Therefore, debit Merchandise Inventory account with $21,780.
- Accounts payable is a liability and it is increased by $21,780. Therefore, credit accounts payable account with $21,780.
Working Note (5):
Calculate the amount of accounts payable.
Purchases = $22,000
Discount percentage = 1%
Record the journal entry of Company C.
Date | Account Title and Explanation |
Post Ref. |
Debit ($) |
Credit ($) |
October 30 | Accounts payable | 21,780 | ||
Cash | 21,780 | |||
(To record payment made in full settlement less discounts) |
Table (10)
- Accounts payable is a liability and it is decreased by $21,780. Therefore, debit accounts payable account with $21,780.
- Cash is an asset and it is decreased by $21,780. Therefore, credit cash account with $21,780.
Record the journal entry of Company C.
Date | Account Title and Explanation |
Post Ref. |
Debit ($) |
Credit ($) |
October 31 | Accounts payable | 14,448 | ||
Cash | 14,448 | |||
(To record payment made in full settlement less discounts) |
Table (11)
- Accounts payable is a liability and it is decreased by $14,448. Therefore, debit accounts payable account with $14,448.
- Cash is an asset and it is decreased by $14,448. Therefore, credit cash account with $14,448.
Record the journal entry of Company C.
Date | Account Title and Explanation |
Post Ref. |
Debit ($) |
Credit ($) |
October 31 | Accounts payable | 27,300 | ||
Cash | 27,300 | |||
(To record payment made in full settlement less discounts) |
Table (12)
- Accounts payable is a liability and it is decreased by $27,300. Therefore, debit accounts payable account with $27,300.
- Cash is an asset and it is decreased by $27,300. Therefore, credit cash account with $27,300.
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