Question

Purchase-Related Transactions

Journalize entries for the following related transactions of Manville Heating & Air Company:

a. Purchased $25,000 of merchandise from Wright Co. on account, terms 2/10, n/30.

b. Paid the amount owed on the invoice within the discount period.

c. Discovered that $5,000 of the merchandise purchased in (a) was defective and returned items, receiving credit.

d. Purchased $3,700 of merchandise from Wright Co. on account, terms n/30.

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

Answer 1

Journal Entries will be as follows:

S.no	Account and explanations	Debit	Credit
(a)	Inventory-Merchandise	$25,000
	Accounts Payable-Wright Co		$25,000
(To record purchase of goods)
(b)	Accounts Payable-Wright Co	$25,000
	Discount received		500
	Cash		$24,500
(To record payment of accounts payable after discount)
* Discount received = $25,000*2% = $500
(c)	Accounts Receivable-Wright Co	$4,900
	Discount received	$100
	Inventory-Merchandise		$5,000
(To record return of goods )
Discount received written off= $5,000*2% =$100
Receivable amount after discount = $5,000*98% =$4,900
(d)	Inventory-Merchandise	$3,700
	Accounts Payable-Wright Co		$3,700
(To record purchase of goods)
(e)	Cash	$1,200
	Accounts Payable-Wright Co	$3,700
	Accounts Receivable-Wright Co		$4,900
(To record receipt of cash from Wright co. after adjustments)