Question

Journalize the following transactions for the buyer, Brooks Company, using the gross method to account for purchase discounts. Assume a perpetual inventory system.
a. November 6 Purchased merchandise from Nelson Company on account, $10,000, terms 4/10, n/30. The goods are shipped FOB shipping point, freight prepaid by seller, $450.
b. November 12 Returned to Nelson Company merchandise previously purchased on account, $2,300.
c. November 16 Paid the amount due to Nelson Company.

Answer 1

Answer:

Brooks Company

Journal Entries

a. November 6:

Debit Inventory $10,000

Credit Accounts Payable (Nelson Company) $10,000

To record the purchase of goods on account, terms 4/10, n/30.

b. November 12:

Debit Accounts Payable (Nelson Company) $2,300

Credit Inventory $2,300

To record the return of goods.

c. November 16:

Debit Accounts Payable (Nelson Company) $7,700

Credit Cash Discount $308

Credit Cash Account $7,392

To record the payment of cash on account.

Explanation:

Brooks Company uses Journal entries to record its business transactions as they occur on a daily basis.  Journal entries identify the accounts to be debited and the accounts to be credited as they will appear in the general ledger.