Question

1. A company purchased $4,500 of merchandise on May 1 with terms of 2/10, n/30. On May 6, it returned $250 of that merchandise. On May 8, it paid the balance owed for merchandise, taking any discount it is entitled to. What are the journal entries for May 1^st, May 6^th, and May 8^th transactions?

Answer 1

May 01,

Merchandise Inventory account................Debit $4,500

To Accounts Payable account..................Credit $4,500

(being Inventory purchased)

May 06,

Accounts Payable account.......................Debit $250

Purchase returns and Allowances ............Credit $250

(Being purchase returns and allowances)

May 08,

Accounts payable account......................Debit $4,250

To Merchandise Inventory account ......Credit $85 [$4,500 - $250] * 2%

To Cash account..................................Credit $4,165