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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

A purchase of merchandise for $300 with a trade discount of 10% would require a debit to Purchases of

  1. (a) $330.
  2. (b) $300.
  3. (c) $297.
  4. (d) $270.

To determine

Find the correct option, the option that indicates the correct amount of debit to Purchases.

Explanation

Purchases: The amount of cost of merchandise bought during a certain period is referred to as cost of purchases.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare journal entry to record the purchase transaction.

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
  Purchases 270 
   Cash/Accounts Payable  270
  (Record purchases made)   

Table (1)

Description for cash purchases:

  • Purchases is an asset account...

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