Question

Information related to Harwick Co. is presented below. 

1. On April 5, purchased merchandise from Botham Company for $23,000, terms 2/10, net/30, FOB shipping point. 

2. On April 6, paid freight costs of $900 on merchandise purchased from Botham.  

3. On April 7, purchased equipment on account for $26,000. 

4. On April 8, returned damaged merchandise to Botham Company and was granted a $3,000 credit for returned merchandise. 

5. On April 15, paid the amount due to Botham Company in full. 

Instructions 

(a) Prepare the journal entries to record these transactions on the books of Harwick Co. under a perpetual inventory system. 

(b) Assume that Harwick Co. paid the balance due to Botham Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

Answer 1

date	accounts	debit	credit
April 5	merchandise inventory a/c	23,000
	...........To Accounts payable a/c		23,000
April 6	merchandise inventory a/c	900
	..............To cash a/c		900
april 7	Equipment a/c	26,000
	..............To accounts payable a/c		26,000
april 8	Accounts payable a/c	3,000
	............merchandise inventory a/c		3,000
april 15	Accounts payable a/c	20,000
	........To cash a/c		19,600
	........To merchandise inventory a/c		400
	(accounts payable = $23,000 - 3,000 returned =>$20,000) cash = $20,000*98% =>$19,600 merchandised inventory = 20,000 payable -19,600 paid =>400

second part:

date	accounts	debit	credit
may 4	Accounts payable	20,000
	.........To cash a/c		20,000

if paid on may 4th there will be no discount available.