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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Purchase-related transactions using perpetual inventory system

The following selected transactions were completed by Capers Company during October of the current year:

Oct 1. Purchased merchandise from UK Imports Co., $14,448, terms FOB destination, n/30.
3. Purchased merchandise from Hoagie Co., $9,950, terms FOB shipping point, 2/10, n/com. Prepaid freight of $220 was added to the invoke.
4. Purchased merchandise from Taco Co., $13,650, terms FOB destination, 2/10, n/30. 6. Issued debit memo to Taco Co. for $4,550 of merchandise returned from purchase on October 4.
13. Paid Hoagie Co. for invoice of October 3-
14.  Paid Taco Co. for invoice of October 4 less debit memo of October 6.
19. Purchased merchandise from Veggie Co., $27,300. terms FOB shipping point, n/com.
19. Paid freight of $400 on October 19 purchase from Veggie Co.
20. Purchased merchandise from Caesar Salad Co., $22,000. terms FOB destination, 1/10, n/30.
30. Paid Caesar Salad Co. for invoice of October 20.
31. Paid UK Imports Co. for invoice of October 1.
31 Paid Veggie Co. for invoice of October 19.

Instructions

Journalize the entries to record the transactions of Capers Company for October.

To determine

Journal entry: Journal is the book of original entry whereby all the financial transactions are recorded in chronological order. Under this method each transaction has two sides, debit side and credit side. Total amount of debit side must be equal to the total amount of credit side. In addition, it is the primary books of accounts for any entity to record the daily transactions and processed further till the presentation of the financial statements.

The following are the rules of debit and credit:

  1. 1. Increase in assets and expenses accounts are debited. Decrease in liabilities and stockholders’ equity accounts are debited.
  2. 2. Increase in liabilities, revenues, and stockholders’ equity accounts are credited. Decreases in all asset accounts are credited.

To Determine:  Preparejournal entries to record the transactions of Company C during the month of October using perpetual inventory system.

Explanation

  • Merchandise Inventory is an asset and it is increased by $14,448. Therefore, debit Merchandise Inventory account with $14,448.
  • Accounts payable is a liability and it is increased by $14,448. Therefore, credit accounts payable account with $14,448.

Record the journal entry of Company C.

Date Account Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

October 3 Merchandise Inventory   9,971  
  Accounts payable     9,971 (1)
  (To record purchase on account)      

Table (2)

Working Note:

Calculate the amount of accounts payable.

Purchases = $9,950

Discount percentage = 2%

Freight charges = $220

Amount of accounts payable} = [(PurchasesDiscount)+Freight]=[Purchases(Purchases×2%)+Freight][$9,950 – ($9,950×2%)+$220]= $9,950$199+$220=$9,971 (1)

Explanation:

  • Merchandise Inventory is an asset and it is increased by $9,971. Therefore, debit Merchandise Inventory account with $9,971.
  • Accounts payable is a liability and it is increased by $9,971. Therefore, credit accounts payable account with $9,971.

Record the journal entry of Company C.

Date Account Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

October 4 Merchandise Inventory   13,377  
  Accounts payable     13,377 (2)
  (To record purchase on account)      

Table (3)

Working Note:

Calculate the amount of accounts payable.

Purchases = $13,650

Discount percentage = 2%

Amount of accounts payable} = (PurchasesDiscount)=Purchases(Purchases×2%)= $13,650 – ($13,650×2%)= $13,650$273=$13,377 (2)

Explanation:

  • Merchandise Inventory is an asset and it is increased by $13,377. Therefore, debit Merchandise Inventory account with $13,377.
  • Accounts payable is a liability and it is increased by $13,377. Therefore, credit accounts payable account with $13,377.

Record the journal entry of Company C.

Date Account Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

October 6 Accounts payable   4,459 (3)  
        Merchandise Inventory     4,459
  (To record purchase return)      

Table (4)

Working Note:

Calculate the amount of accounts payable.

Purchases return = $4,550

Discount percentage = 2%

Amount of accounts payable} = (Purchases returnDiscount)=Purchases return(Purchases return×2%)= $4,550 – ($4,550×2%)= $4,550$91=$4,459 (3)

Explanation:

  • Accounts payable is a liability and it is decreased by $4,459. Therefore, debit accounts payable account with $4,459.
  • Merchandise Inventory is an asset and it is decreased by $4,459. Therefore, credit Merchandise Inventory account with $4,459.

Record the journal entry of Company C.

Date Account Title and Explanation

Post

Ref.

Debit

($)

Credit

($)

October 13 Accounts payable   9,971  
        Cash     9,971
  (To record payment made in full settlement less discounts)      

Table (5)

Explanation:

  • Accounts payable is a liability and it is decreased by $9,971. Therefore, debit accounts payable account with $9,971.
  • Cash is an asset and it is decreased by $9,971. Therefore, credit cash account with $9,971.

Record the journal entry of Company C.

Date Account Title and Explanation

Post

Ref

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