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Chapter 5: Q20E (page 300)

Howie Jewelers had the following purchase transactions. Journalize all necessary transactions. Explanations are not required.

Jun. 20 Purchased inventory of \(5,100 on account from Sanders Diamonds, a jewelry importer. Terms were 2/15, n/45, FOB shipping point.

20 Paid freight charges, \)400.

Jul. 4 Returned \(600 of inventory to Sanders.

14 Paid Sanders Diamonds, less return.

16 Purchased inventory of \)3,500 on account from Southboro Diamonds, a jewelry importer. Terms were 2/10, n/EOM, FOB destination.

18 Received a $300 allowance from Southboro Diamonds for damaged but usable goods.

24 Paid Southboro Diamonds, less allowance, and discount.

Short Answer

Expert verified

The total of debits and credits is$18,036.

Step by step solution

01

Meaning of Purchase Transactions

In accounting, purchase transactions refer to the events that bring the goods in. Under this process, a business concern acquiresgoods from the supplier to resell them to generateprofits.

02

Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Jun 20

Merchandise inventory

5,100

Accounts payable

5,100

Jun 20

Freight expenses

400

Cash

400

Jul 4

Accounts payable

600

Merchandise inventory

600

Jul 14

Accounts payable (5100-600)

4,500

Cash

4,500

Jul 16

Merchandise inventory

3,500

Accounts payable

3,500

Jul 18

Accounts payable

300

Merchandise inventory

300

Jul 24

Accounts payable (3200-3200*2%)

3,136

Cash

3,136

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Most popular questions from this chapter

Journalize the following transactions that occurred in June 2018 for Daley Company. Assume Daley uses the periodic inventory system. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Daley estimates sales returns at the end of each month.

Jun. 3 Purchased merchandise inventory on account from Sherry Wholesalers, \(5,500. Terms 3/15, n/EOM, FOB shipping point.

4 Paid freight bill of \)42 on June 3 purchase.

4 Purchased merchandise inventory for cash of \(1,100.

6 Returned \)200 of inventory from June 3 purchase.

8 Sold merchandise inventory to Henrich Company, \(4,400, on account. Terms 2/15, n/35.

9 Purchased merchandise inventory on account from Tex Wholesalers, \)4,600. Terms 1/10, n/30, FOB destination.

10 Made payment to Sherry Wholesalers for goods purchased on June 3, less return and discount.

12 Received payment from Henrich Company, less discount.

13 After negotiations, received a \(300 allowance from Tex Wholesalers.

15 Sold merchandise inventory to Jarvis Company, \)1,500, on account. Terms n/EOM.

22 Made payment, less allowance, to Tex Wholesalers for goods purchased on June 9.

23 Jarvis Company returned \(100 of the merchandise sold on June 15.

25 Sold merchandise inventory to Smith for \)700 on account. Terms of 3/10, n/30 was offered, FOB shipping point.

29 Received payment from Smith, less discount.

30 Received payment from Jarvis Company, less return.

How is gross profit calculated, and what does it represent?

M Wholesale Company began the year with merchandise inventory of \(5,000. During the year, M purchased \)93,000 of goods and returned \(6,600 due to damage. M also paid freight charges of \)1,200 on inventory purchases. At year-end, M’s ending merchandise inventory balance stood at $17,200. Assume that M uses the periodic inventory system. Compute M’s cost of goods sold for the year.

Journalize the following sales transactions for Sierra Tractors. Explanations are not required.

June 5 Sierra sold \(20,000 of inventory on account, credit terms are 4/10, n/30. Cost of goods is \)10,000. Sierra uses the gross method to record sales revenue.

12 Sierra receives payment from the customer on the amount due, less the discount.

Suppose Piranha.com sells 3,500 books on account for \(17 each (cost of these books is \)35,700) on October 10, 2018 to The Textbook Store. One hundred of these books (cost $1,020) were damaged in shipment, so Piranha.com later received the damaged goods from The Textbook Store as sales returns on October 13, 2018.

Requirements

1. Journalize The Textbook Store’s October 2018 transactions.

2. Journalize Piranha.com’s October 2018 transactions. The company estimates sales returns at the end of each month.
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