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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Purchase-related transactions

The debits and credits from four related transactions are presented in the following T accounts. Describe each transaction.

Chapter 6, Problem 6.5EX, Purchase-related transactions The debits and credits from four related transactions are presented in

To determine

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

To Describe: The purchase of merchandise inventory on account.

Explanation
  1. (1) Describe the purchase of merchandise inventory on account.
Date Account Title and Explanation Post Ref.

Debit

($)

Credit

($)

  Merchandise Inventory   20,580  
  Accounts Payable     20,580
  (To record purchases of inventory on account after discount)      

Table (1)

  • Merchandise inventory is an asset and it is increased by $20,580 due to purchase of inventory. Therefore, debit inventory account with $20,580.
  • Accounts payable is a liability and it is increased by $20,580 due to purchase of inventory on account. Therefore, credit accounts payable account with $20,580.
  1. (2) Describe the journal entry for freight charges paid.
Date Account Title and Explanation Post Ref. Debit ($) Credit ($)
  Merchandise Inventory   300  
  Cash     300
  (To record the payment of freight charges)      

Table (2)

  • Merchandise Inventory is an asset and it is increased by $300 due to freight charges paid. Therefore, debit inventory account with $300.
  • Cash is an asset and it is decreased by $300 due to freight charges paid by cash. Therefore, credit cash account with $300.
  1. (3) Describe the journal entry for purchase returned...

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