Question

X-Mart uses the perpetual inventory system to account for its merchandise. On May 1, it purchased $400 of merchandise on account with terms of 2/15, n/40. On May 3, X-Mart returned $50 of merchandise due to defect. Assuming that the purchase was paid for within the discount period, demonstrate the required journal entry for X-Mart to record the payment.

Answer 1

Answer:

The journal entries to record the whole purchase and payment process are:

May 1, purchase of merchandise on account

Dr Merchandise inventory 400

    Cr Accounts payable 400

May 3, defective merchandise returned

Dr Accounts payable 50

    Cr Purchase returns and allowances 50

Dr Purchase returns and allowances 50

    Cr Merchandise inventory 50

May 10? payment of merchandise account

Dr Accounts payable 350

    Cr Cash 343

    Cr Purchases discounts 7