Question

On March 1, Warwick’s Co., a women’s clothing store, purchased $75,000 of merchandise from a supplier on account, terms FOB destination, 2/10, n/30. On March 5, Warwick’s returned $9,000 of the merchandise, receiving a credit memo, and then paid the amount due on March 9, within the discount period.

Journalize Warwick’s entries to record (a) the purchase, (b) the merchandise return, and (c) the payment. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS
Warwick’s Co.
General Ledger
ASSETS 110 Cash 120 Accounts Receivable 125 Notes Receivable 130 Merchandise Inventory 131 Estimated Returns Inventory 140 Office Supplies 141 Store Supplies 142 Prepaid Insurance 180 Land 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 216 Salaries Payable 218 Sales Tax Payable 219 Customers Refunds Payable 220 Unearned Rent 221 Notes Payable EQUITY 310 Owner, Capital 311 Owner, Drawing 312 Income Summary PAGE 10 JOURNAL ACCOUNTING EQUATION Score: 54/76 DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 ✔ 2 3 ✔ ✔ 4 ✔ 5 ✔ ✔ 6 ✔ ✔	REVENUE 410 Sales 610 Rent Revenue EXPENSES 510 Cost of Merchandise Sold 521 Delivery Expense 522 Advertising Expense 524 Depreciation Expense-Store Equipment 525 Depreciation Expense-Office Equipment 526 Salaries Expense 531 Rent Expense 533 Insurance Expense 534 Store Supplies Expense 535 Office Supplies Expense 536 Credit Card Expense 539 Miscellaneous Expense 710 Interest Expense

Answer 1

Warwick Co

Entries to record the purchase, the merchandise return and the payment:

Date	Account Titles and Explanation	Ref. No.	Debit	Credit
Mar 1,	Merchandise Inventory		$75,000
	Accounts Payable			$75,000
	(To record purchase of inventory on account)
Mar 5,	Accounts Payable		$9,000
	Merchandise Inventory			$9,000
	(To record purchase returns)
Mar 9,	Accounts Payable		$66,000
	Merchandise Inventory			$1,320
	Cash			$64,680
	(To record payment made within discount period; 66,000 x 2% = $1,320; 66,000 x 98% = $64,680)

Income Summary:

	Date	Description	Post Ref.	Debit	Credit	Assets	Liabilities	Equity
1	March 1,	Merchandise Inventory		$75,000		$75,000
2	March 1,	Accounts Payable			$75,000		$75,000
3	March 5,	Accounts Payable		$9,000			($9,000)
4	March 5,	Merchandise Inventory			$9,000	($9,000)
5	March 9,	Accounts Payable		$66,000			($66,000)
6	March 9,	Merchandise Inventory			$1,320	($1,320)
7	March 9,	Cash			$64,680	($64,680)