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In: Accounting

Journalize entries for the following related transactions of Lilly Heating & Air Company using the net method under a perpetual inventory system

Purchase-Related Transactions


Journalize entries for the following related transactions of Lilly Heating & Air Company using the net method under a perpetual inventory system. (If an amount box does not require an entry, leave it blank.)

a. Purchased $43,000 of merchandise from Schell Co. on account, terms 1/10, n/30.

  

b. Paid the amount owed on the invoice.

  

c. Discovered that merchandise with an invoice amount of $8,600 purchased in (a) was defective and returned items, receiving credit.

  

d. Purchased $7,100 of merchandise from Schell Co. on account, terms n/30.

  

e. Received a refund from Schell Co. for return in (c) less the purchase in (d).

  

Solutions

Expert Solution

Journal Entries:
Date Account Titles and Explanation Debit Credit
a) Merchandise Inventory $43,000
   Accounts Payable - Schell Co. $43,000
(To record the purchase of inventory on account)
b) Accounts Payable - Schell Co. $43,000
   Discount Received ($43,000*1/100) $430
   Cash ($43,000 - $430) $42,570
(To record the payment to creditors for the amount owed along with discount)
c) Accounts Receivable - Schell Co. $8,600
   Merchandise Inventory $8,600
(To record the return of defective merchandise and receiving credit)
d) Merchandise Inventory $7,100
   Accounts Payable - Schell Co. $7,100
(To record the purchase of inventory on account)
e) Accounts Payable - Schell Co. $7,100
Cash ($8,600 - $7,100) $1,500
   Accounts Receivable - Schell Co. $8,600
(To record the receipt of credit for return less the purchase in d)

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