Question

5- On June 10, Tala Company purchased on account $50,000 of merchandise from Tigare Company, FOB destination, terms 2/10, n/30. Tala pays cash the freight costs of $600 on June 11.

Damaged goods totaling $700 are returned to Tigare for credit on June 12.

On June 19, Tala pays Tigare in full less the purchase discount. Both companies use a perpetual inventory system.

Instructions

(a) Prepare separate entries for each transaction on the books of Tala Company.

Answer 1

In the books of Tala Company	(Amount in $)
Journal entries		Debit	Credit
june 10	Purchase a/c Dr	50,000.00
	To Tigare company a/c		50,000.00
	(Being Merchandise purchased from Tigare company)
June 11th	Freight inwards A/c Dr	600.00
	To cash a/c		600.00
	(Being Freight cost paid)
June 12th	Tigare Company A/c Dr	700.00
	To Purchase return a/c		700.00
	(Being Inventory returned)
june 19th	Tigare Company A/c Dr	49,300.00
	To cash a/c		48,314.00
	To discount received a/c		986.00
	(Being Amount paid to Tigare Company after receiveing 2% discount)
	(cost of merchandise is 50,000 and goods returned 700 so net payable to Tigare company is 49,300. As per the terms if the payment is made with in 10 days of purchase Tala Company will be eligible to receive 2 % discount. So 2% on 49,300 would be 986 and the balance was paid to Tigare company.