On May 6, Melissa purchased merchandise for her computer store. The invoice was
ID: 2500149 • Letter: O
Question
On May 6, Melissa purchased merchandise for her computer store. The invoice was for $70,000 plus freight of $1,500, terms 1/15, n/30. The freight was included with the invoice. On May 10, Melissa returned merchandise for $10,000 Credit. On My 19, Melissa paid the amount owed. Fill in the blanks below. The credit to Accounts Payable on May 6 is . The debit to Freight-In on May 6 is . The debit to Accounts Payable on May 10 is . The credit to Purchases Discount on May 19 is . The credit to Cash on May 19 is .Explanation / Answer
Answer for 3.
a. Account payable on May 6 is $71500. as the cost incurred of freight is a direct cost and will be included in the cost of merchandise and will be booked as account payable.
b. Debit to freight in on May 6 is $0. As the cost of freight is included in the cost of Marchandise due to direct connection with the merchandise. So, freight will be added to marchandise cost and shall not be debited to freight in account.
c. Debit to Account payable on May 10 is $ 10000. As the marchandise has been returned to the vendor so the amount payable is lesser by $10000.
d. Credit to Purchase account on May 19 is $615. As per the terms with the vendor, vendor will give 1% discount of invoice if the payment is made within 15days. So as the payment is made on 19th May Malisa will get a purchase discount of 1% i.e. ($70000+$1500-$10000)*1%= $615.
e. Cash cannot be credit. But for answer the credit of Cash will be $61500-615= $ 60885
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