Question

Information related to Tamarisk, Inc. is presented below. 1. On April 5, purchased merchandise on account from Culver Company for $38,900, terms 2/10, net/30, FOB shipping point. 2. On April 6, paid freight costs of $800 on merchandise purchased from Culver.3. On April 7, purchased equipment on account for $39,900.4. On April 8, returned damaged merchandise to Culver Company and was granted a $5,000 credit for returned merchandise.5. On April 15, paid the amount due to Culver Company in full.Required:a. Prepare the journal entries to record these transactions on the books of Tamarisk, Inc. under a perpetual inventory system. b. Assume that Tamarisk, Inc. paid the balance due to Culver Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

Answer 1

Answer:

Required a

April 5,

Merchandise $38,900 (debit)

Accounts Payable ; Culver Company  $38,900 (credit)

April 6

Freight Cost $800 (debit)

Cash $800 (credit)

April 7

Equipment $39,900 (debit)

Accounts Payable $39,900 (credit)

April 8

Accounts Payable ; Culver Company  $5,000 (debit)

Merchandise $5,000 (credit)

April 15

Accounts Payable ; Culver Company  $33,900 (debit)

Discount Received $678 (credit)

Cash $33,222 (credit)

Required b.

Accounts Payable ; Culver Company  $33,900 (debit)

Cash $33,900 (credit)

Explanation:

When Tamarisk, Inc. paid the balance due to Culver Company on April 15, the payment is made within the discount period. Thus Tamarisk, Inc is granted a discount of 2% and pays the Account at $33,222 (net of credit granted on merchandise previously returned) .

However, when Tamarisk, Inc. paid the balance due to Culver Company on May 4 instead, the payment is made outside the discount period. Thus Tamarisk, Inc is not granted a discount  pays the Account in full at  $33,900 (net of credit granted on merchandise previously returned) .