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Chapter 13: Question 1BE (page 692)

BE13-1 (L01) Roley Corporation uses a periodic inventory system and the gross method of accounting for purchase discounts. On July 1, Roley purchased \(60,000 of inventory, terms 2/10, n/30, FOB shipping point. Roley paid freight costs of \)1,200. On July 3, Roley returned damaged goods and received credit of $6,000. On July 10, Roley paid for the goods. Prepare all necessary journal entries for Roley.

Short Answer

Expert verified

The amount of freight expense is $1,200.

Step by step solution

01

Meaning of Accounts Payable

The amount due for the purchaser to the supplier of goods or services is referred to as accounts payable. The purchaser needs to record it as a liability on the balance sheet.

02

Closing Entries

Date

Accounts and Explanation

Debit $

Credit $

July, 1

Purchase

$60,000

Accounts Payable

$60,000

(To record inventory purchased on credit)

July, 1

Freight Expenses

$1,200

Cash

$1,200

(To record freight paid)

July, 3

Accounts Payable

$6,000

Purchase Return and Allowances

$6,000

(To record purchase return)

July, 10

Accounts Payable ($60,000-$6,000)

$54,000

Cash

$52,920

Purchase Discount ($54,000 x 2%)

$1,080

(To record accounts payable paid in cash)

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