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Chapter 5: Q29E (page 303)

Lawrence Appliances had the following purchase transactions. Journalize all necessary transactions using the periodic inventory system. Explanations are not required.

Sep. 4 Purchased inventory of \(6,900 on account from Max Appliance Wholesale, an appliance wholesaler. Terms were 3/15, n/30, FOB shipping point.

4 Paid freight charges, \)480.

10 Returned \(300 of inventory to Max.

17 Paid Max Appliance Wholesale, less return, and discount.

20 Purchased inventory of \)3,900 from MY Appliance, an appliance wholesaler. Terms were 1/10, n/45, FOB destination.

22 Received a $400 allowance from MY Appliance for damaged but usable goods.

29 Paid MY Appliance, less allowance and discount.

Short Answer

Expert verified

The total of debits and credits is$22,080.

Step by step solution

01

Meaning of Raw Materials 

In cost accounting, raw material denotes the goods required to be processed before selling them to the consumers. Raw materials pass through the production process and appear asfinished goods.

02

Preparation of journal entries

Date

Accounts and Explanation

Debit ($)

Credit ($)

Sep 4

Purchases

6,900

Accounts payable

6,900

Sept 4

Freight in

480

Cash

480

Sep 10

Accounts payable

300

Purchase returns

300

Sep 17

Accounts payable (6900-300)

6,600

Purchase discount (6600*3%)

198

Cash

6402

Sep 20

Purchases

3,900

Accounts payable

3,900

Sep 22

Accounts payable

400

Purchase allowance

400

Sep 29

Accounts payable (3900-400)

3,500

Purchase discount (3500*1%)

35

Cash

3,465

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Most popular questions from this chapter

What is the Cost of Goods Sold (COGS), and where is it reported?

Consider the following transactions for Burlington Drug Store:

Feb. 2 Burlington buys \(23,800 worth of inventory on account with credit terms of 2/15, n/30, FOB shipping point.

4 Burlington pays a \)50 freight charge.

9 Burlington returns $5,200 of the merchandise due to damage during shipment.

14 Burlington paid the amount due, less return and discount.

Requirements

1. Journalize the purchase transactions. Explanations are not required.

2. In the final analysis, how much did the inventory cost Burlington Drug Store?

Click Computers’ Merchandise Inventory account at year-end is showing a balance of \(43,000. The physical count of inventory came up with \)42,500. Journalize the adjusting entry needed to account for the inventory shrinkage. The company uses the perpetual inventory system.

Question: Journalize the following transactions that occurred in January 2018 for Mike’s Amusements. Assume Mike’s uses the gross method to record sales revenue. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name.

Jan. 4 Purchased merchandise inventory on account from Vanderbilt Company, \(5,000. Terms 1/10, n/EOM, FOB shipping point.

6 Paid freight bill of \)150 on January 4 purchase.

8 Returned half the inventory purchased on January 4 from Vanderbilt Company.

10 Sold merchandise inventory for cash, \(1,100. Cost of goods, \)440. FOB destination.

11 Sold merchandise inventory to Gilmore Corporation, \(10,100, on account, terms of 3/10, n/EOM. Cost of goods, \)5,555. FOB shipping point.

12 Paid freight bill of \(30 on January 10 sale.

13 Sold merchandise inventory to Cadet Company, \)8,800, on account, terms of 3/10, n/45. Cost of goods, \(4,400. FOB shipping point.

14 Paid the amount owed on account from January 4, less return and discount.

18 Purchased inventory of \)4,600 on account from Roberts Corporation. Payment terms were 1/10, n/30, FOB destination.

20 Received cash from Gilmore Corporation, less discount.

26 Paid amount owed on account from January 18, less discount.

28 Received cash from Cadet Company.

29 Purchased inventory from Silk Corporation for cash, \(12,000, FOB shipping point. Freight in paid to shipping company, \)240.

When granting a sales allowance is there a return of merchandise inventory from the customer? Describe the journal entry(ies) that would be recorded.
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