Question

.Journal Entries for Purchases and Cash Payments: Note: One way to meet the 250-word minimum requirement for your primary post is to define the new terms that you are using. Review the preparation of journal entries in the Demonstration problem on pp. 418-421 and the demonstration video in the Unit 5 Resources explaining the preparation of journal entries for purchase transactions. Once you understand how these journal entries are prepared, please select one transaction from Problem 11-11B, on page 433 of the text, for Debbie's Doll House, and answer the questions below for that transaction. There are 12 journal entries in this problem, but each of you must select an entry that has not been completed by a classmate! If all of the journal entries have been prepared select an entry from the Chapter 10 discussion question. First come, first served! Please be sure to identify your entry by the date of the transaction and provide your response in your own words. Remember, the primary posting is a short answer essay that fully explains your responses. What happened? (Describe the transaction) Which accounts are affected by this transaction? Are they increased or decreased? What is the normal balance of each of these accounts? Which accounts are debited and by what amount? Explain how you arrived at that amount. Which accounts are credited and by what amount? Explain how you arrived at that amount.

PURCHASES AND CASH PAYMENTS TRANSACTIONS Debbie Mueller owns a small retail business called Debbie’s Doll House. The cash account has a balance of $20,000 on July 1. The following transactions occurred during July:

July	1	Issued Check No. 314 for July rent, $1,400.
	1	Purchased merchandise on account from Topper’s Toys, Invoice No. 211, $2,500, terms 2/10, n/30.
	3	Purchased merchandise on account from Jones & Company, Invoice No. 812, $2,800, terms 1/10, n/30.
	5	Returned merchandise purchased from Topper’s Toys receiving a credit memo on the amount owed, $400.
	8	Purchased merchandise on account from Downtown Merchants, Invoice No. 159, $1,600, terms 2/10, n/30.
	11	Issued Check No. 315 to Topper’s Toys for merchandise purchased on account, less return of July 5 and less 2% discount.
	13	Issued Check No. 316 to Jones & Company for merchandise purchased on account, less 1% discount.
	15	Returned merchandise purchased from Downtown Merchants receiving a credit memo on the amount owed, $600.
	18	Issued Check No. 317 to Downtown Merchants for merchandise purchased on account, less return of July 15 and less 2% discount.
	25	Purchased merchandise on account from Columbia Products, Invoice No. 468, $3,200, terms n/30.
	26	Purchased merchandise on account from Topper’s Toys, Invoice No. 395, $1,430, terms 2/10, n/30.
	29	Purchased merchandise on account from Jones & Company, Invoice No. 853, $2,970, terms 1/10, n/30.

Answer 1

Date	General Journal	Debit ($)	Credit ($)
Jul-01	Rent	1400.00
	Bank		1400.00

This is a transaction which involves payment for rent. Rent is an item of expense and it has a debit balance by default. So rent gets debited and its balance increases. Bank account is an item of asset which also has a debit balance by default. But by issuing check, its balance gets reduced. Therefore bank account will be credited here. It does not have any impact on cash balance.
Date General Journal Debit ($) Credit ($) Jul-01 Purchase 2500.00    Trade Discount 50.00    Topper's Toys 2450.00

						This is a transaction which is a credit purchase. Purchase is an item of expense and it has a debit balance by default. So purchase gets debited for the whole amount of 2500 and its balance increases. Trade discount is an income which is embedded in the terms of transaction. "2/10" specifies that 2% discount on the invoice value will be received if the payment is made within 10 days from the invoice date. Therefore an amount of $50 (2500*2%) will be credited as discount since it is an item of income. Because we received $50 as discount, what remains to be paid is only $2450 (2500-50). It is a liability which has a credit balance in the name of the vendor. Therefore accounts payable in the name of Topper's Toys will be credited for the balance amount of $2450. Date General Journal Debit ($) Credit ($) Jul-03 Purchase 2800.00 Trade Discount 28.00    Jones & Company    2772.00 This is a transaction which is a credit purchase. Purchase is an item of expense and it has a debit balance by default. So purchase gets debited for the whole amount of 2800 and its balance increases. Trade discount is an income which is embedded in the terms of transaction. "1/10" specifies that 1% discount on the invoice value will be received if the payment is made within 10 days from the invoice date. Therefore an amount of $28 (2800*1%) will be credited as discount since it is an item of income. Because we received $28 as discount, what remains to be paid is only $2772 (2800-28). It is a liability which has a credit balance in the name of the vendor. Therefore accounts payable in the name of Jones & Company will be credited for the balance amount of $2772 Date General Journal Debit ($) Credit ($) Jul-05 Topper's Toys 400.00    Purchase Returns 400.00 This transaction involves the return of goods purchased. The balance of accounts payable in the name of Topper's Toys gets reduced to the extent of $400. Hence there is a deduction in a liability and it is debited. Purchase returns is an account which causes a deduction in expense and because of this, it will be credited. It will always have a credit balance. Date General Journal Debit ($) Credit ($) Jul-05 Purchase 1600.00 Trade Discount 32.00 Downtown Merchants 1568.00 This is a transaction which a credit purchase. Purchase is an item of expense and it has a debit balance by default. So purchase gets debited for the whole amount of 1600 and its balance increases. Trade discount is an income which is embedded in the terms of transaction. "2/10" specifies that 2% discount on the invoice value will be received if the payment is made within 10 days from the invoice date. Therefore an amount of $ 32 (1600*2%) will be credited as discount since it is an item of income. Because we received $32 as discount, what remains to be paid is only $1568 (1600-32). It is a liability which has a credit balance in the name of the vendor. Therefore accounts payable in the name of Downtown Merchants will be credited for the balance amount of $1568 Date General Journal Debit ($) Credit ($) Jul-11 Topper's Toys 2050    Bank 2050 This transaction involves payment to vendor against invoice. Here, what remains to be paid is only $2050 (2450-400) ie. the credit balance in the account of Topper's Toys. This amount is arrived by taking the net of purchase (2500 Cr), discount (50 Dr) and purchase returns (400 Dr). Since this is a deduction in liability, his account is debited and after this debit, the balance in his account is nil. Bank account is credited because of the fact that the asset balance gets reduced to the extent of $2050. Date General Journal Debit ($) Credit ($) Jul-13 Jones & Company 2772 Bank 2772 This transaction involves payment to vendor against invoice. Here, what remains to be paid is only $2772 (2800-28) ie. the credit balance in the account of Jones & Company. This amount is arrived by taking the net of purchase (2800 Cr) and discount (28 Dr). Since this is a deduction in liability, his account is debited and after this debit, the balance in his account is nil. Bank account is credited because of the fact that the asset balance gets reduced to the extent of $2772. Date General Journal Debit ($) Credit ($) Jul-15 Downtown Merchants 600.00    Purchase Returns 600.00 This transaction involves the return of goods purchased. The balance of accounts payable in the name of Downtown Merchant gets reduced to the extent of $600. Hence there is a deduction in a liability and it is debited. Purchase returns is an account which causes a deduction in expense and because of this, it will be credited. It will always have a credit balance. Date General Journal Debit ($) Credit ($) Jul-18 Downtown Merchants 968.00 Bank 968.00 This transaction involves payment to vendor against invoice. Here, what remains to be paid is only $968 (1568-600) ie. the credit balance in the account of Downtown Merchants. This amount is arrived by taking the net of purchase (1600Cr), discount (32 Dr) and purchase returns (600 Dr). Since this is a deduction in liability, his account is debited and after this debit, the balance in his account is nil. Bank account is credited because of the fact that the asset balance gets reduced to the extent of $968. Date General Journal Debit ($) Credit ($) Jul-25 Purchase 3200.00    Columbia Products 3200.00 This is a transaction of credit purchase with no terms for discount and here, the term is only for the due date for payment, ie. 30 days from the date of invoice. Purchase gets debited because it is an item of expense and Columbia Product is credited because it is a liability in the nature of accounts payable. Both balances of purchases and accounts payable are increased. Date General Journal Debit ($) Credit ($) Jul-26 Purchase 1430.00    Trade Discount 28.60 Topper's Toys 1401.40 This is a transaction which is a credit purchase. Purchase is an item of expense and it has a debit balance by default. So purchase gets debited for the whole amount of 1430 and its balance increases. Trade discount is an income which is embedded in the terms of transaction. "2/10" specifies that 2% discount on the invoice value will be received if the payment is made within 10 days from the invoice date. Therefore an amount of $28.6 (1430*2%) will be credited as discount since it is an item of income. Because we received $28.6 as discount, what remains to be paid is only $1401.4 (1430-28.6). It is a liability which has a credit balance in the name of the vendor. Therefore accounts payable in the name of Topper's Toys will be credited for the balane amount of $1401.4 Date General Journal Debit ($) Credit ($) Jul-29 Purchase 2970.00    Trade Discount 29.70    Jones & Company    2940.30 This is a transaction which a credit purchase. Purchase is an item of expense and it has a debit balance by default. So purchase gets debited for the whole amount of 2970 and its balance increases. Trade discount is an income which is embedded in the terms of transaction. "1/10" specifies that 1% discount on the invoice value will be received if the payment is made within 10 days from the invoice date. Therefore an amount of $29.7 (2970*1%) will be credited as discount since it is an item of income. Because we received $29.7 as discount, what remains to be paid is only $2940.3 (2970-29.7). It is a liability which has a credit balance in the name of the vendor. Therefore accounts payable in the name of Jones & Company will be credited for the balane amount of $2940.3