Question

This information relates to Larkspur Co. 1. On April 5, purchased merchandise from Crane Company for $27,300, on account, terms 2/10, n/30. 2. On April 6, paid freight costs of $3,300 on merchandise purchased from Crane Company. 3. On April 7, purchased equipment on account for $38,300. 4. On April 8, returned $3,700 of the April 5 merchandise to Crane Company. 5. On April 15, paid the amount due to Crane Company in full. Prepare the journal entries to record these transactions on the books of Larkspur using a periodic inventory system

Answer 1

Answer:

Puchases                      27,300 debit

     Accounts Payable                       27,300 credit

--to record purchase of inventory--

Freight in                     3,300 debit

               Cash                                    3,300 credit

--to record the freight--

Equipment                   38,300 debit

         Accounts Payable                      38,300 credit

--to record purchase of equipment--

account payable          3,700 debit

        purchase returns and allowance    3,700 credit

--to record returned good to Crane Company--

accounts payable      23,600 debit

       purchase returns and allowance    472 credit

        Cash                                           23,128 credit

--to record payment to Crane Company--

purchase returns and allowance  4,172 debit

Inventory                                     26,428 debit

          Freight in                                         3,300 credit

          Purchases                                     27,300 credit

--record of inventory at the end  of the month (assuming no other transaction is left to record) --

Explanation:

record under periodic inventory system

Thus, we use discounts and allowance accounts rather than directly adjust for inventory.

purchases balance at payment date:

27,300 - 3,700 = 23,600

discount of 2% over 23,600  = 472

cash disbursement: 23,600 - 472 = 23,128

Inventory valuation:

23,128 + 3,300 freight in = 26,428