Question

On June 10, Carla Vista Company purchased $8,000 of merchandise on account from Flint Company, FOB shipping point, terms 1/10, n/30. Carla Vista pays the freight costs of $550 on June 11. Damaged goods totaling $400 are returned to Flint for credit on June 12. The fair value of these goods is $70. On June 19, Carla Vista pays Flint Company in full, less the purchase discount. Both companies use a perpetual inventory system. Prepare separate entries for each transaction on the books of Carla Vista Company.

Answer 1

The journal entries are shown below

Each transaction On the books of Carla vista Company:

On June 10
Merchandise Inventory A/c $8,000
           To Accounts payable A/c $8,000
(Being inventory purchased on credit)

On June 11
Merchandise inventory A/c Dr $550
To Cash A/c $550
(Being freight paid by cash)

On June 12
Account payable A/c Dr $400
      To Merchandise inventory A/c $400
(Being returned inventory is recorded)

On June 19
Accounts payable A/c Dr $7,600 ($8,000 - $400)
     To Cash A/c   $7,524   
     To Merchandise Inventory A/c $76 ($8,000 - $400) × 1%  
(Being due amount is paid and the balance is credited to the cash account)