Question

On June 10, Concord Corporation purchased $8,050 of merchandise on account from Sarasota Company, FOB shipping point, terms 1/10, n/30. Concord pays the freight costs of $510 on June 11. Damaged goods totaling $450 are returned to Sarasota for credit on June 12. The fair value of these goods is $80. On June 19, Concord pays Sarasota Company in full, less the purchase discount. Both companies use a perpetual inventory system.

Answer 1

Solution:

The journal entries are as follows in the books of Concord Corporation

On June 10

Merchandise inventory A/c            Dr    $8,050

             To Account payable A/c                            $8,050

(Being the inventory is purchased on account)                

On June 11

Merchandise inventory A/c         Dr     $510

            To Cash A/c                                               $510

(Being freight is paid by cash)

On June 12

Accounts payable A/c                 Dr       $450

   To Merchandise Inventory A/c                            $450

(Being goods returned is recorded)

On June 19

Accounts payable A/c               Dr     $7,600 ($8,050 - $450)

   To Cash A/c                                                          $7,524 ($7,600 × 1%)

   To Merchandise Inventory A/c                               $76

(Being payment is recorded)