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Purchase-related transactions Stylon Co., a women’s clothing store, purchased $48,000 of merchandise from a supplier on account, terms FOB destination, 2/10, n/30. Stylon returned merchandise with an Invoice amount of $7,500, receiving a credit memo. Journalize Stylon’s entries to record (a) the purchase, (b) the merchandise return, (c) the payment within the discount period of 10 days, and (d) the payment beyond the discount period of 10 days.

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 5, Problem 7E
Textbook Problem
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Purchase-related transactions

Stylon Co., a women’s clothing store, purchased $48,000 of merchandise from a supplier on account, terms FOB destination, 2/10, n/30. Stylon returned merchandise with an Invoice amount of $7,500, receiving a credit memo. Journalize Stylon’s entries to record (a) the purchase, (b) the merchandise return, (c) the payment within the discount period of 10 days, and (d) the payment beyond the discount period of 10 days.

(a)

To determine

Record the purchase of merchandise inventory on account under the terms of 2/10, n/30.

Explanation of Solution

Purchases is an activity of acquiring the merchandise inventory of a business.

Record the purchase of merchandise inventory on account.

DateAccount Title and ExplanationPost Ref.

Debit

($)

Credit

($)

 Inventory 47,040 
 Accounts Payable  47,040
 (To record purchases of inventory on account after discount)   

Table (1)

  • Inventory is an asset and it is increased by $47,040. Therefore, debit inventory account with $47,040.
  • Accounts payable is a liability and it is increased by $47,040. Therefore, credit accounts payable account with $47,040.

Working Note:

Calculate the amount of accounts payable...

(b)

To determine

Record the journal entry for merchandise return.

(c)

To determine

Record the journal entry for the due amount paid within the discount period of 10 days.

(d)

To determine

Record the journal entry for the due amount paid after the discount period.

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Chapter 5 Solutions

Financial And Managerial Accounting
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