Question

Prepare journal entries to record each of the following transactions of a merchandising company.

The company uses a perpetual inventory system and the gross method. Nov. 5 Purchased 1,000 units of product at a cost of $20 per unit. Terms of the sale are 3/10, n/60; the invoice is dated November 5. Nov. 7 Returned 45 defective units from the November 5 purchase and received full credit. Nov. 15 Paid the amount due from the November 5 purchase, minus the return on November 7.

Answer 1

Date	Account Titles and Explanation	Debit	Credit
Nov 5	Inventory [1000 x $20]	$ 20,000
	Accounts payable		$ 20,000
	[To record purchase of inventory on account ]
Nov 7	Accounts payable [45 x $20]	$ 900
	Inventory		$ 900
	[To record purchase returns]
Nov 7	Accounts payable [45 x $20]	$ 900
	Inventory		$ 900
	[To record purchase allowance]
Nov 15	Accounts payable [$20,000 - $900 - $900]	$ 18,200
	Inventory [18200 x 3%]		$ 546
	Cash		$ 17,654
	[To record cash paid for accounts payable]