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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

The Wheatland Company purchased merchandise on account from a supplier for $30,000, terms 1/10, n/30. The Wheatland Company returned $8,000 of the merchandise and received full credit.

a.    What is the amount of cash required for the payment within the discount period?

b.    Under a perpetual inventory system, what account is credited by The Wheatland Company to record the return?

a.

To determine

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

To Calculate: The requirement of cash to pay the merchandise purchased on account during the discount period.

Explanation

Calculate the cash requirement for payment of merchandise purchased on account during the discount period after the purchase return of $8,000.

Merchandise purchased on account = $30,000

Purchase return = $8,000

Discount percentage = 1% (Term 1/10, n/30 )

Cash required = Netmerchandise purchased on accountDiscount=[(Merchandise purchased on accountPurchasereturns)(Net merchandis

b.

To determine

To Name: The account that is credited by Company W to record the return.

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