Question

Journalize entries for the following related transactions of Lilly Heating & Air Company. Refer to the Chart of Accounts for exact wording of account titles. A. Purchased $48,400 of merchandise from Schell Co. on account, terms 1/10, n/30. B. Paid the amount owed on the invoice within the discount period. C. Discovered that $7,800 of the merchandise purchased in (A) was defective and returned items, receiving credit. D. Purchased $6,000 of merchandise from Schell Co. on account, terms n/30. E. Received a refund from Schell Co. for return in (C) less the purchase in (D).

Answer 1

Answer:

Explanation:

The journal entries are shown below:

(A) Inventory A/c Dr $47,916

      To Accounts payable A/c $47,916

(Being purchase made on credit basis is recorded)

The computation of the inventory is shown below:

= Purchase amount - purchase amount × discount rate

= $48,400 - $48,400 × 1%

= $48,400 - $484

= $47,916

(B) Accounts payable A/c $47,916

             To Cash A/c                  $47,916

(Being amount paid recorded)

(C)  Inventory A/c Dr $7,722

      To Accounts payable A/c $7,722

(Being return inventory is recorded)

The computation of the inventory is shown below:

= Purchase amount - purchase amount × discount rate

= $7,800- $7,800 × 1%

= $7,800 - $78

= $7,722

(D) inventory A/c Dr $6,000

      To Accounts payable A/c $6,000

(Being purchase made on credit basis is recorded)

(E) Cash A/c Dr $1,722                             ($7,722 - $6,000)

     To Accounts payable A/c $1,722

(Being received refund amount recorded)