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Problem 8-6 Birkey Company and Nelson Company both use a perpetual inventory system. These transactions occurred...

Problem 8-6

Birkey Company and Nelson Company both use a perpetual inventory system. These transactions occurred during August 2019. Prepare the journal entries to record these transactions for both the Birkey Company and the Nelson Company.

August 1               Birkey Company purchased $6,000 of merchandise on account from Nelson Company with credit terms of 2/10, n/30. The cost of the merchandise was $4,500.

August 7               Birkey returned $800 of the merchandise to Nelson. The cost of the returned merchandise was $600.

August 10            Birkey paid Nelson $3000 of the amount owed.

August 31            Birkey paid Nelson the balance due.

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Answer #1

Journal entries : Birkey Company

Date General Journal Debit Credit
Aug 1 Merchandise inventory 6000
Account payable 6000
Aug 7 Account payable 800
Merchandise inventory 800
Aug 10 Account payable (6000-800) 5200
Cash (5200*98%) 5096
Merchandise inventory 104
Aug 31 Account payable 5200
Cash 5200

Journal entry : Nelson Company

Aug 1 Account receivable 6000
Sales revenue 6000
Cost of goods sold 4500
Merchandise inventory 4500
Aug 7 Sales return and allowance 800
Account receivable 800
Merchandise inventory 600
Cost of goods sold 600
Aug 10 Cash (5200*98%) 5096
Sales discount 104
Account receivable 5200
Aug 31 Cash 5200
Account receivable 5200
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