Question

Journalize the following foregoing transactions of the buyer, assuming that the company uses the perpetual inventory system. Refer to the Chart of Accounts for exact wording of account titles.

Dec. 1 Merchandise with a list price of $4,700 is purchased on account, terms FOB shipping point, 1/10, n/30. The seller prepaid freight costs of $100.
3 Prior to payment, $1,600 of the merchandise is returned.
8 The invoice is paid within the discount period.

Answer 1

Answer:

Buyer perspective:

Inventory  4700 debit

Accounts Payable  4700 credit

--to record purchase--    

Accounts Payable 1600 debit

Inventory  1600 credit

--to record returned goods--  

Accounts Payable 3100 debit

Inventory  31 credit

Cash     3069 credit

--to record payment within discount--  

Explanation:

The freights are being paid by the seller as the FOB shipping point the goods are in their possesion until arrive at destination thus, it should assume the trasnportation cost

Account balance:

4700 invoice - 1600 return = 3,100

discount 1% of the balance: 31

cash outlay considering the discount

3,100 - 31 = 3,069