Question

On June 10, Metlock Company purchased $6,300 of merchandise from Ivanhoe Company, on account, terms 3/10, n/30. Metlock pays the freight costs of $390 on June 11. Goods totaling $300 are returned to Ivanhoe for credit on June 12. On June 19, Metlock Company pays Ivanhoe Company in full, less the purchase discount. Both companies use a perpetual inventory system. Part A. Prepare separate entries for each transaction on the books of Purcey Company


Part B. Prepare separate entries for each transaction for Guyer Company. The merchandise purchased by Purcey on June 10 cost Guyer $2,430, and the goods returned cost Guyer $260.

Answer 1

Answer:

Metlock Company

Inventory                  6,300 debit

Accounts Payables             6,300 credit

--to record purchase--

Inventory                     390 debit

   Cash                                    390 credit

--to record payment of freight--

Accounts Payable       300 debit

  Inventory                              300 credit

--return of inventory--

Accounts Payable    6,000 debit

   Inventory                            180 credit

   Cash                               5,820 credit

--payment within discount period--

Ivanhoe Company

Accounts Receivables         6,300 debit

            Sales Revenues                   6,300 credit

COGS                                    2,430 debit

 Inventory                                         2,430 credit

--to record sale and cost of the goods sold--

Sales Returns       300 debit

  Accounts Receivable           300 credit

Inventory                260 debit

  Accounts Receivables          260 credit

--to record returned goods from Metlock--

Sales Discount                  180  debit

Cash                               5,820 debit

    Accounts Receivables    6,000 credit

--to record collection within discount period--

Explanation:

Account balance at payment date:

6,300 nominal less 300 return = 6,000

Discount of 3% within first 10 days:

6,000 nominal x 3% = 180 dollars

Net: 6,000 nominal - 180 discount = 5,820 dollars