Question

This information relates to Crisp Co.1. On April 5, purchased merchandise from Frost Company for $28,000, terms 2/10, n/30.2. On April 6, paid freight costs of $700 on merchandise purchased from Frost.3. On April 7, purchased equipment on account for $30,000.4. On April 8, returned $3,600 of April 5 merchandise to Frost Company.5. On April 15, paid the amount due to Frost Company in full.(a) Prepare the journal entries to record the transactions listed above on Crisp Co.'s books. Crisp Co. uses a perpetual inventory system.(b) Assume that Crisp Co. paid the balance due to Frost Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

Answer 1

Answer and Explanation:

The journal entries are shown below:

a. On April 5

Merchandise Inventory $28,000

         To Accounts Payable  $28,000

(Being the merchandise purchased on the account is recorded)

On April 6

Merchandise Inventory $700  

          To Cash  $700

(Being freight cost is paid is recorded)

On April 7

Equipment $30,000

      To Accounts Payable  $30,000

(Being equipment purchased on the account is recorded)

On April 8

Accounts Payable $3,600

       To Merchandise Inventory  $3,600

(Being returned inventory is recorded)

On April 15

Accounts Payable ($28,000 - $3,600) $24,400

               To Cash  $23,912

                To Merchandise Inventory ($24,400 × 2%)  $488

(Being payment is made)

b. On May 4

Accounts Payable ($28,000 - $3,600) $24,400

              To Cash $24,400

(Being payment is made)