Question

Roley Corporation uses a periodic inventory system and the gross method of accounting for purchase discounts.

Answer 1

Answer:

Explanation:

The journal entries are shown below:

(A) Purchase A/c Dr $60,000  

        To  Accounts Payable A/c $60,000

(Being inventory is purchased on credit basis)

(A) (2) Freight in Dr $1,200

            To Cash A/c $1,200

(Being freight is paid for cash)

(B) Accounts Payable A/c Dr $6,000

         To Purchase Return $6,000

(Being returned goods are recorded)

(C) Accounts Payable A/c Dr $54,000

               To Purchase Return $1,080

               To Cash A/c $52,920

(Being the cash is paid for cash)

The computation is shown below:

Accounts payable would be

= $60,000 - $6,000

= $54,000

And, the purchase return would be

= $54,000 × 2%

= $1,080

And, the remaining balance is credited to cash account