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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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( Appendix 6A) Recording Purchases

Compass Inc. purchased 1,250 bags of insulation, on account, from Glassco Inc. The bags of insulation cost $5.50 each. Compass paid Turner Trucking $320 to have the bags of insulation shipped to its warehouse. Compass returned 50 bags that were defective and paid for the remainder. Assume that Compass uses the periodic inventory system.

Required:

1. Prepare a journal entry to record the purchase of the bags of insulation.

2. Prepare the entry to record the payment for shipping.

3. Prepare the entry for the return of the defective bags.

4. Prepare the entry to record the payment for the bags kept by Compass.

5. What is the total cost of this purchase?

6. CONCEPTUAL CONNECTION If you have previously worked Exercise 6-45 compare your answers. What are the differences? Be sure to explain why the differences occurred.

To determine

(a)

Journal entries:

These are the source of recording the revenues and expenses. Revenue is to be credited and expenses are to be debited in this. As purchases are expenses for the business, thus, it is to be debited.

The journal entry to record purchase of bags of insulation.

Explanation

The journal entry to record the purchase of the bags of insulation:

Date Particular Debit $ Credit $
Purchase Account (1,250×$5
To determine

(b)

Journal entries:

These are the source of recording the revenues and expenses. Revenue is to be credited and expenses are to be debited in this. As purchases are expenses for the business, thus, it is to be debited.

The journal entry to record the payment of shipping.

To determine

(c)

Journal entries:

These are the source of recording the revenues and expenses. Revenue is to be credited and expenses are to be debited in this. As purchases are expenses for the business, thus, it is to be debited.

The journal entry to record the return of defective bags.

To determine

(d)

Journal entries:

These are the source of recording the revenues and expenses. Revenue is to be credited and expenses are to be debited in this. As purchases are expenses for the business, thus, it is to be debited.

The journal entry to record the payment for the bags kept by compass.

To determine

(e)

Journal entries:

These are the source of recording the revenues and expenses. Revenue is to be credited and expenses are to be debited in this. As purchases are expenses for the business, thus, it is to be debited.

The total cost of this purchase.

To determine

(f)

Journal entries:

These are the source of recording the revenues and expenses. Revenue is to be credited and expenses are to be debited in this. As purchases are expenses for the business, thus, it is to be debited.

The comparison of answers and explain the differences.

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