Question

In: Accounting

Assume Anderson’s General Store bought, on credit, a truckload of merchandise from American Wholesaling costing $37,000....

Assume Anderson’s General Store bought, on credit, a truckload of merchandise from American Wholesaling costing $37,000. If the company was charged $790 in transportation cost by National Trucking, immediately returned goods to American Wholesaling costing $2,600, and then took advantage of American Wholesaling’s 2/10, n/30 purchase discount.

Prepare journal entries to record the inventory transactions, assuming Anderson’s uses a perpetual inventory system

Solutions

Expert Solution

On purchase of merchandise on credit:

Date

Account title and explanation

Debit

Credit

Inventory

$ 37,000

     Accounts payable

$ 37,000

(Purchase of merchandise on account)

2). When expenses such as freight-in, insurance etc. are incurred:

Date

Account title and explanation

Debit

Credit

Inventory

$ 790

     Cash

$ 790

( Paid for transport)

(3). When goods are returned to supplier:

Date

Account title and explanation

Debit

Credit

Accounts payable

$ 2,600

     Inventory

$ 2,600

( Return of merchandise to supplier)

On payment of accounts payable:

Date

Account title and explanation

Debit

Credit

Accounts payable ($37,000-$2,600)

$ 34,400

      Purchase discounts ($34,400×0.02)

$ 688

      Cash

$ 33,712

(Payment of accounts payable after availing purchase discount)


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