Question

Compass Inc. purchased 1250 bags of insulation, on account, from Glassco Inc. The bags of insulation cost $5.50 each. Compass paid Turner Trucking $320 to have the bags of insulation shipped to its warehouse. Compass returned 50 bags that were defective and paid for the remainder. Assume that Compass uses the perpetual inventory system and that Glassco did not offer a purchase discount.
Prepare a journal entry to record the purchase of the bags of insulation.
Prepare the entry to record the payment for shipping.
Prepare the entry for the return of the defective bags.
Prepare the entry to record the payment for the bags kept by Compass.

Answer 1

Solution and Explanation:

Journal entry to record the purchase the bags of insultaion.

Date            Particulars                                  Debit                       Credit

                 Inventory                                       $6875

                 accounts payable                                                        $6875

(Purchased insulated bags from Glassco Inc., 1250bags at the rate $5.5 each)

entry to record the payment for shipping

                Inventory                                          $320

                   cash                                                                           $320

( paid shipping charges for bags to warehouse)

entry for return of the defective bags

              accounts payable                                 $275

                   Inventory                                                                       $275

( returned defective bags to glassco Inc)

To record the payment for the bags kept by compass.

          Accounts payable                                        $6600

            cash                                                                                           $6600

( payment for remaining bags to Glassco Inc., )