Chapter 6 Work Q- 4 Instructions On March 1, Warwick’s Co., a women’s clothing s
ID: 2491548 • Letter: C
Question
Chapter 6 Work Q- 4
Instructions
On March 1, Warwick’s Co., a women’s clothing store, purchased $74,600 of merchandise from a supplier on account, terms FOB destination, 2/10, n/30. On March 5, Warwick’s returned $9,500 of the merchandise, receiving a credit memo, and then paid the amount due on March 9, within the discount period.
CHART OF ACCOUNTS
Warwick’s Co.
General Ledger
ASSETS
110
Cash
120
Accounts Receivable
125
Notes Receivable
130
Merchandise Inventory
131
Estimated Returns Inventory
140
Office Supplies
141
Store Supplies
142
Prepaid Insurance
180
Land
192
Store Equipment
193
Accumulated Depreciation-Store Equipment
194
Office Equipment
195
Accumulated Depreciation-Office Equipment
LIABILITIES
EQUITY
210
Accounts Payable
216
Salaries Payable
218
Sales Tax Payable
219
Customers Refunds Payable
220
Unearned Rent
221
Notes Payable
310
Owner, Capital
311
Owner, Drawing
312
Income Summary
REVENUE
EXPENSES
410
Sales
610
Rent Revenue
510
Cost of Merchandise Sold
521
Delivery Expense
522
Advertising Expense
524
Depreciation Expense-Store Equipment
525
Depreciation Expense-Office Equipment
526
Salaries Expense
531
Rent Expense
533
Insurance Expense
534
Store Supplies Expense
535
Office Supplies Expense
536
Credit Card Expense
539
Miscellaneous Expense
710
Interest Expense
Journal
Journalize Warwick’s entries to record (a) the purchase, (b) the merchandise return, and (c) the payment. Refer to the Chart of Accounts for exact wording of account titles.
JOURNAL
DATE
DESCRIPTION
DEBIT
CREDIT
CHART OF ACCOUNTS
Warwick’s Co.
General Ledger
ASSETS
110
Cash
120
Accounts Receivable
125
Notes Receivable
130
Merchandise Inventory
131
Estimated Returns Inventory
140
Office Supplies
141
Store Supplies
142
Prepaid Insurance
180
Land
192
Store Equipment
193
Accumulated Depreciation-Store Equipment
194
Office Equipment
195
Accumulated Depreciation-Office Equipment
LIABILITIES
EQUITY
210
Accounts Payable
216
Salaries Payable
218
Sales Tax Payable
219
Customers Refunds Payable
220
Unearned Rent
221
Notes Payable
310
Owner, Capital
311
Owner, Drawing
312
Income Summary
REVENUE
EXPENSES
410
Sales
610
Rent Revenue
510
Cost of Merchandise Sold
521
Delivery Expense
522
Advertising Expense
524
Depreciation Expense-Store Equipment
525
Depreciation Expense-Office Equipment
526
Salaries Expense
531
Rent Expense
533
Insurance Expense
534
Store Supplies Expense
535
Office Supplies Expense
536
Credit Card Expense
539
Miscellaneous Expense
710
Interest Expense
Explanation / Answer
Entry for Purchase:
Date
Description
Debit
Credit
1-Mar
Merchandise Inventory
74600
Accounts payable
4600
Entry for Return:
Date
Description
Debit
Credit
5-Mar
Accounts payable
9500
Merchandise inventory
9500
Entry for payment:
Since the payment is being made within discount period, so the store will have a 2% discount:
Amount of discount = (74600-9500) x 2%
= $1,302
Date
Description
Debit
Credit
9-Mar
Accounts payable (74500-9600)
65100
Discount received
1302
Cash
63798
Date
Description
Debit
Credit
1-Mar
Merchandise Inventory
74600
Accounts payable
4600
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