Question

3. These are the events occurred in a service company during the year xxx1, using perpetual...

3. These are the events occurred in a service company during the year xxx1, using perpetual inventory and net method for the accounting transactions. Prepare the Journal Entry for each transaction (identify the general ledger accounts and the dollars amount for each event).

Example: Purchased merchandise on account for $1,500 (list price).

Account Name

Increase or Decrease

Amount

Inventory

Increase

1,500

Accounts Payable

Increase

1,500

Explanation: merchandise inventory asset account and the liabilities increased in the Balance Sheet.

  1. February 3-Purchased merchandise inventory for $4,000, credit terms 2/10, n/30 and FOB Shipping Point.

Account Name

Increase or Decrease

Amount

Explanation:

  1. February 5-paid $90 in cash for shipping charges regarding the purchases realized on February 3.

Account Name

Increase or Decrease

Amount

Explanation:
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Answer #1
  1. February 3-Purchased merchandise inventory for $4,000, credit terms 2/10, n/30 and FOB Shipping Point.

Account Name

Increase or Decrease

Amount
Merchandise inventory

Increase

4000*98% = 3920
Account payable

Increase

3920

Explanation:

 merchandise inventory asset account and the liabilities increased in the Balance Sheet.
  1. February 5-paid $90 in cash for shipping charges regarding the purchases realized on February 3.

Account Name

Increase or Decrease

Amount
Merchandise inventory

Increase

90
Cash

Decrease

90

Explanation:

 Freight expense paid
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