Question

 

Suppose KC Toys buys $20,000 worth of MegoBlock toys on Oct 1st, 2014 on credit terms of 2/10, n/30. Some of the goods are damaged in shipment, so KC Toys returns $1,500 of the merchandise to MegoBlock on Oct 5th.

Required:

a) How much must KC Toys pay MegoBlock if KC Toys pays on Oct 8th?

b) Record the transactions in general journal format (i.e., Journal entries) for Oct 1st, Oct 5th, and Oct 8th.

c) On Oct 20th, KC Toys sold merchandise that cost $10,000 for $18,000 cash to its customer. Record these transactions in the general journal format.

d) Prepare T-accounts. Assume cash account has a beginning balance of $50,000 for 2014.

Answer 1

		$
a	Purchases	20,000
	Less : Returns	(1,500)
	Net purchase value	18,500
	Less: Discount ($ 18,500 x 2%)	(370)
	Net payable	18,130
b	Account's tittle	Debit $	Credit $
1-Oct	Inventory	20,000
	Accounts payable		20,000
5-Oct	Accounts payable	1,500
	Inventory		1,500
	( purchases return )
8-Oct	Accounts payable	18,500
	Discount received		370
	Cash		18,130
c
20-Oct	Cash	18,000
	Sales		18,000
	Cost of goods sold	10,000
	Inventory		10,000

Cash
		Debit $		Credit $
	Beginning balance	50,000
8-Oct			Accounts Payable	18,130
20-Oct	Sales	18,000
			Ending balance	49,870
	TOTAL	68,000	TOTAL	68,000