Question

Journalize entries for the following related transactions of Lilly Heating & Air Company. Refer to the Chart of Accounts for exact wording of account titles.

A.	Purchased $36,000 of merchandise from Schell Co. on account, terms 1/10, n/30.
B.	Paid the amount owed on the invoice within the discount period.
C.	Discovered that $9,000 of the merchandise purchased in (A) was defective and returned items, receiving credit.
D.	Purchased $5,000 of merchandise from Schell Co. on account, terms n/30.
E.	Received a refund from Schell Co. for return in (C) less the purchase in (D).

Answer 1

Answer: Preparation of Journal entries
No	Accounts Title and explanation	Debit (in $)	Credit (in $)
A	Inventory ($36,000 (-) ($36,000 * 1%))	$35,640
	Accounts Payable		$35,640
	(To record the purchase of Merchandise on Account)
B	Accounts Payable	$35,640
	Cash		$35,640
	(To record the Payment made within the Discount Period)
C	Accounts Payable ($9,000 (-) ($9,000 * 1%))	$8,910
	Inventory		$8,910
	(To record the defective items return)
D	Inventory	$5,000
	Accounts Payable		$5,000
	(To record the purchase of merchandise on account)
E	Cash ($8,910 (-) $5,000)	$3,910
	Accounts Payable		$3,910
	(To record the refund received by the Company)