Chapter 6 Work Question 2- EX.6-3.ALGO Purchase-Related Transactions Locust Comp

Question

Chapter 6 Work Question 2- EX.6-3.ALGO

Purchase-Related Transactions

Locust Company purchased merchandise on account from a supplier for $8,800, terms 1/10, n/30. Locust Company returned $1,100 of the merchandise and received full credit.

a. If Locust Company pays the The bill that the seller sends to the buyer.invoice within the discount period, what is the amount of cash required for the payment?

$

b. Under a The inventory system in which each purchase and sale of merchandise is recorded in an inventory account.perpetual inventory system, what account is credited by Locust Company to record the return?

Accounts Receivable

or

Cost of Merchandise Sold

or

Credit Card Expense

or

Delivery Expense

or

Merchandise Inventory

or

             Sales

$

Explanation / Answer

A.

purchase = 8800

less return = 1100

net purchase = 7700 $

discount @ 1% = 77 ( since payment is made within discounted period discount = 7700 * 1% = 77 $)

net payment = 7623 $

B. when purchase following entry is passed

   merchandise inventory a/c Dr. 8800 $

   to supplier payable a/c 8800$

now when inventory is return following entry is passed

  supplier payable a/c Dr. 1100$

   To merchandise inventory a/c 1100$

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.