Question

Journalize entries for the following related transactions of Lilly Heating & Air Company. Refer to the Chart of Accounts for exact wording of account titles. A. Purchased $36,000 of merchandise from Schell Co. on account, terms 1/10, n/30. B. Paid the amount owed on the invoice within the discount period. C. Discovered that $9,000 of the merchandise purchased in (A) was defective and returned items, receiving credit. D. Purchased $5,000 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).

Answer 1

Concepts and reason

Accounting: Accounting refers to the process of recording the transactions, classifying it in a specific manner, and further, it is the process of summarizing and analyzing after which the results are interpreted. Financial statements and ledger accounts are prepared in order to accomplish the procedure.

Transaction: A transaction refers to the act of buying or selling goods or rendering of the service that is reliably measured in terms of money.

Journal entries: Journal entries are an important part of the accounting function. A journal entry is about recording whether the transaction is a debit or credit. Also, the total of both debit and credit must be equal. The following rules need to be followed while preparing the journal entries.

Fundamentals

Purchase of merchandise: It refers to the buying of the goods or services. The purchase can be made on credit as well as on the cash basis.

Adjusting entry: Adjusting entries are prepared after preparing trial balance during the end of the year. Accrual base of accounting is succeeded by the accounts of the company. Thus, the ending balances are altered. It reports the company’s financial position in an exact manner.

Discount: It is the deduction allowed to the customer on the goods and services availed by them. It reduces the sales price of the goods.

Gross method: It is the opposite of the net method. It records the invoice at full price without offering any cash discounts. The customer adjusts the discount later if it is taken by him. It records the purchase without a discount.

(A)

Prepare the journal entries for the given transaction:

(B)

Prepare the journal entries for the given transaction:

(C)

Prepare the journal entries for the given transaction:

(D)

Prepare the journal entries for the given transaction:

(E)

Prepare the journal entries for the given transaction:

Ans: Part A

Part B

Part C

Part D

Part E