Question

Presented below is information related to Chile Co.

1. On April 5, purchased merchandise from Graham Company for $16,000, terms 2/10, net/30, FOB shipping point.

2. On April 6, paid freight costs of $800 on merchandise purchased from Graham.

3. On April 7, purchased equipment on account from Reed Mfg. Co. for $27,000.

4. On April 8, returned merchandise, which cost $4,000, to Graham Company.

5. On April 15, paid the amount due to Graham Company in full.

Instructions

(a) Prepare the journal entries to record these transactions on the books of Chile Co. using a periodic inventory system.

(b) Assume that Chile Co. paid the balance due to Graham Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

Answer 1

Journal Entry- Chile Co.
Date	Account titles and explanation	Debit	Credit
5-Apr	Merchandise Inventory	$16,000
	Account payable- G Company		$16,000
	To Record Inventory Purchased from Gramaham Co.
6-Apr	Merchandise Inventory	$800
	Cash		$800
	To Record Freight Paid
7-Apr	Equipment	$27,000
	Account payable		$27,000
	TO Record Record Purchased Equipment
8-Apr	Account payable- G Company	$4,000
	Merchandise Inventory		$4,000
	TO Record Inventory Returned by Graham Compsny
15-Apr	Account payable- G Company (16000-4000)	$12,000
	Cash (12000-240)		$11,760
	Merchandise Inventory (12000*2%)		$240
	TO Record payment made to Gramham Company
Journal Entry- Chile Co.
Date	Account titles and explanation	Debit	Credit
15-Apr	Account payable- G Company (16000-4000)	$12,000
	Cash		$12,000
	TO Record payment made to Gramham Company