This information relates to Prophet Co. 1. On April 5 purchased merchandise from

Question

This information relates to Prophet Co.

1. On April 5 purchased merchandise from Lombard Company for $25,000, terms 2/10, n/30.
2. On April 6 paid freight costs of $900 on merchandise purchased from Lombard.
3. On April 7 purchased equipment on account for $30,000.
4. On April 8 returned some of April 5 merchandise to Lombard Company which cost $3,600.
5. On April 15 paid the amount due to Lombard Company in full.

(a) Prepare the journal entries to record the transactions listed above on the books of Prophet Co. Prophet Co. uses a perpetual inventory system.

(b) Assume that Prophet Co. paid the balance due to Lombard Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

Explanation / Answer

a.

April 5

Debit: Merchandise Inventory 25,000

Credit: Accounts Payable 25,000

April 6,

Debit: Merchandise Inventory 900

Credit: Cash 900

April 7

Debit: Equipment 30,000

Credit: Accounts Payable 30,000

April 8

Debit: Accounts Payable 3,600

Credit: Merchandise Inventory 3,600

April 15

Debit: Accounts Payable 25,000

Credit: Merchandise Inventory 2,500

Credit: Cash 22,500

b.

May 4

Debit: Accounts Payable 25,000

Credit: Cash 25,000

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