Question

Information related to Harwick Co. is presented below.1. On April 5, purchased merchandise from Botham Company for $32,400, terms 3/10, net/30, FOB shipping point.2. On April 6, paid freight costs of $860 on merchandise purchased from Botham.3. On April 7, purchased equipment on account for $40,000.4. On April 8, returned damaged merchandise to Botham Company and was granted a $6,800 credit for returned merchandise.5. On April 15, paid the amount due to Botham Company in full.A) Prepare the journal entries to record these transactions on the books of Harwick Co. under a perpetual inventory system.B) Assume that Harwick Co. paid the balance due to Botham Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

Answer 1

Answer:

A) Prepare the journal entries to record these transactions on the books of Harwick Co. under a perpetual inventory system.

April 5, purchased merchandise terms 3/10, net/30, FOB shipping point

Dr Merchandise inventory 32,400

    Cr Accounts payable 32,4000

April 6, paid freight costs (in perpetual inventory, freight ans insurance costs increase COGS so they are included in merchandise inventory)

Dr Merchandise inventory 860

    Cr Cash 860

April 7, purchased equipment on account

Dr Equipment 40,000

    Cr Accounts payable 40,000

April 8, returned damaged merchandise

Dr Accounts payable 6,800

    Cr Merchandise inventory 6,800

April 15, paid Botham's invoice within discount term

Dr Accounts payable 25,600

    Cr Cash 24,832

    Cr Purchase discounts 768

B) Assume that Harwick Co. paid the balance due to Botham Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

May 4, paid Botham's invoice

Dr Accounts payable 25,600

    Cr Cash 25,600