Question

Mom & Pop Shop uses the periodic inventory system. Below are information for the month of...

Mom & Pop Shop uses the periodic inventory system.
Below are information for the month of May 2020.
May 1st. Purchased merchandises, on account, from Costco,
valued at $25,000. FOB Destination for $600 was paid by cash
and by the responsible party. Credit terms were 3/10, n/30.
May 6th. Mom & Pop Shop returned merchandises to Costco,
valued at $5,000.  
May 10th. Mom & Pop Shop settled the account.
Prepare the 3 journal entries in the Diagonal Box
for Mom & Pop Shop

Homework Answers

Answer #1

Final amount due = Cost of goods purchased - Cost of goods returned

= 25,000 - 5,000

= $20,000

Discount amount = Final amount due x Discount percentage

= 20,000 x 3/10

= $600

Cash payment to be made = Final amount due - Discount amount

= 20,000 - 600

= $19,400

Freight charges of $600 will be paid by the seller.

Journal

Date

Account title

Debit

Credit

May 1

Purchases

25,000

Accounts payable - Costco,\

25,000

May 6

Accounts payable

5,000

Purchase returns and allowances

5,000

May 10

Accounts payable - Costco

20,000

Cash

19,400

Purchase discount

600

Kindly comment if you need further assistance.

Thanks‼!

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