Question

Warwick's Co., a women's clothing store, purchased $22,000 of merchandise from a supplier on account, terms FOB destination, 1/10, n/30. Warwick's returned $3,300 of the merchandise, receiving a credit memo.
a. Journalize Warwick's Co.'s entry to record the purchase.
b. Journalize Warwick's Co.'s entry to record the merchandise return.
c. Journalize Warwick's Co. entry to record the payment within the discount period of ten days.
d. Journalize Warwick's Co. entry to record the payment beyond the discount period of ten days. If an amount box does not require an entry, leave it blank.

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

a. Inventory Dr, $21,780 $22,000 - ($22,000 × 1%)

To Accounts payable $21,780

(Being purchase is recorded)

b. Accounts payable Dr, $3,267 ($3,267 - ($3,267 × 1%))

To Inventory $3,267

(Being merchandise return is recorded)

c. Accounts payable Dr, $18,513  ($22,000 - $3,300 × 99%)

             To Cash $18,513

(Being payment within the discount period of ten days is recorded)

d. Accounts Payable Dr, $18,513 ($21,780 - $3,267)

   Inventory Dr, $187 ($18,700 - $18,513)

             To Cash $18,700 ($22,000 - $3,300)

(to record payment beyond discount term)