Question

Dec. 1 Merchandise with a list price of $4,700 is purchased on account, terms FOB shipping point, 1/10, n/30. The seller prepaid freight costs of $100. 3 Prior to payment, $1,600 of the merchandise is returned. 8 The invoice is paid within the discount period.
Record the foregoing transactions of the buyer in the sequence indicated below, assuming a perpetual inventory system is used.
a. Purchased the merchandise.
b. Recorded receipt of the credit memo for merchandise returned.
c. Paid the amount owed.

Answer 1

Explanation:

The Journal entry is shown below:-

a. Merchandise inventory Dr,       $4,700

          To accounts payable                 $4,700

(Being Purchase of merchandise is recorded)

b. Accounts payable Dr,                $1,600

           To Merchandise inventory       $1,600

(Being Return of merchandise is recorded)

c.  Accounts payable Dr,                $3,100

             To Merchandise inventory        $31

                                                           ($3,100 × 1%)

              To cash account                        $3,069

(Being the amount paid)