This information relates to Crisp Co. 1.On April 5, purchased merchandise from F

Question

This information relates to Crisp Co.

1.On April 5, purchased merchandise from Frost Company for $28,000, terms 2/10, n/30.
2.On April 6, paid freight costs of $700 on merchandise purchased from Frost.
3.On April 7, purchased equipment on account for $30,000.
4.On April 8, returned $3,600 of April 5 merchandise to Frost Company.
5.On April 15, paid the amount due to Frost Company in full.

(a)Prepare the journal entries to record the transactions listed above on Crisp Co.'s books. Crisp Co. uses a perpetual inventory system.
(b)Assume that Crisp Co. paid the balance due to Frost Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

Explanation / Answer

Date Entry Debit Credit For purchase of inventory on credit 5-Apr Inventory a/c Dr $28,000.00 To Accounts payable a/c Cr $28,000.00 (Being inventory purchased on credit) For Freight 6-Apr Inventory a/c Dr $700.00 To cash a/c Cr $700.00 (Being Freight paid on inventory purchased) For purchase of equipment 7-Apr Equipment a/c   Dr $30,000.00 To Accounts payable a/c Cr $30,000.00 (Being equipment purchased on credit) Goods returned to supplier 8-Apr Accounts payable a/c Dr $3,600.00 To Inventory a/c   Cr $3,600.00 (Being goods purchased returned) For payment to creditor 15-Apr Accounts payable a/c Dr $24,400.00 To cash a/c Cr $23,912.00 To inventory a/c Cr 2%*(28,000-3600) $488.00 (Being payment made for inventory with in the credit term) 4-May Accounts payable a/c Dr $24,400.00 To Cash a/c Cr $24,400.00 (Being payment made for inventory out of credit period)

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