Question

Nov. 5 Purchased 1,100 units of product at a cost of $40 per unit. Terms of the sale are 5/10, n/60; the invoice is dated November 5.
Nov. 7 Returned 25 defective units from the November 5 purchase and received full credit.
Nov. 15 Paid the amount due from the November 5 purchase, minus the return on November 7.
Prepare the journal entries to record each of the above purchases transactions of a merchandising company. Assume a perpetual inventory system.

Answer 1

Answer:

Explanation:

November 5 - Purchase = 1100

Unit cost = $40

Payable = (1,100*40) 44000

November 7

Returns - 25 defective units = 25*40 =1000

Terms of sale = 5/10 , n/60

If invoices are paid within 10 days , a discount of 5% is given.

Therefore payment on November 15 attracts a discount of 5% of the net purchase

Journal entries

Date                      Description            Debit       Credit

November 5            Inventory            44,000

                          Accounts payable                      44,000

November 7        Accounts payable     1000

                                Inventory                                  1000

November 15    Accounts payable      43,000

                             Inventory (discount)                     2,150

                                  Cash                                        40,850