Question

Cornerstone Exercise 6-20 (Algorithmic) Recording Purchase Transactions Mathis Company and Reece Company use the perpetual inventory...

Cornerstone Exercise 6-20 (Algorithmic)
Recording Purchase Transactions

Mathis Company and Reece Company use the perpetual inventory system. The following transactions occurred during the month of April:

  1. On April 1, Mathis Company purchased merchandise on account from Reece Company with credit terms of 2/10, n/30. The selling price of the merchandise was $3,500, and the cost of the merchandise sold was $2,450.
  2. On April 1, Mathis paid freight charges of $100 cash to have the goods delivered to its warehouse.
  3. On April 8, Mathis returned $1,000 of the merchandise which had originally cost Reece $700.
  4. On April 10, Mathis paid Reece the balance due.

Required:

Prepare the journal entry to record the April 1 purchase (ignore any freight charges) of merchandise by Mathis Company.

April 1
(Purchased inventory on account)

Prepare the journal entry to record the payment of freight on April 1.

April 1
(Recorded the payment of freight charges)

Prepare the journal entry to record the April 8 return of merchandise.

April 8
(Returned merchandise)

Prepare the journal entry to record the April 10 payment to Reece Company. If an amount box does not require an entry, leave it blank.

April 10
(Paid accounts payable within discount period)

Homework Answers

Answer #1
Answer
Date Account Title Debit Credit

Apr-01

Inventory $3,500
      Accounts Payable $3,500
(Purchased inventory on account)
Apr-01 Inventory $   100
     Cash $   100
(Recorded the payment of freight charges)
Apr-06 Accounts Payable $1,000
     Inventory $1,000
(Returned merchandise)
Apr-10 Accounts Payable $2,500 3500-1000
     Cash $2,450 2500-50
     Inventory $     50 2500*2%

(Paid accounts payable within discount period)

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