Answer:
May 2 Purchases books on account from Readers Wholesale for $4,100, terms 2/10, n/30.
Dr Merchandise inventory 4,100
Cr Accounts payable 4,100
May 3 Pays cash for freight costs of $280 on books purchased from Readers.
Dr Merchandise inventory 280
Cr Cash 280
When you use perpetual inventory all freight costs (and any additional costs related to the purchase) must be included in the inventory account as part of the cost of the merchandise.
May 5 Returns books with a cost of $400 to Readers because part of the order is incorrect.
Dr Accounts payable 400
Cr Merchandise inventory 400
May 10 Pays the full amount due to Readers.
Dr Accounts payable 3,700
Cr Cash 3,626 [= ($4,100 - $400) x 98%]
Cr Purchase discounts 74
Since the payment is done within the discount period, you will pay 2% less. The purchase discount has a credit balance since it reduces costs.
May 30 Sells all books purchased on May 2 (less those returned on May 5) for $4,800 on account.
Dr Accounts receivable 4,800
Cr Sales revenue 4,800
Dr COGS 3,980
Cr Merchandise inventory 3,980
