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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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Section
BuyFindarrow_forward

Accounting

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

Purchase-related transactions

The debits and credits for four related entries for a purchase of $40,000, terms 2/10, n/30, are presented in the following T accounts. Describe each transaction.

Cash Accounts Payable
(2) 450 (3) 4,900 (1) 39,200
(4) 34,300 (4) 34,300
Merchandise Inventory
(1) 39,200 (3) 4,900
(2) 450

(1)

To determine

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

To Describe: The purchase of merchandise inventory on account under the terms of 2/10, n/30.

Explanation

Describe the purchase of merchandise inventory on account.

Date Account Title and Explanation Post Ref.

Debit

($)

Credit

($)

  Merchandise Inventory   39,200  
  Accounts Payable     39,200 (1)
  (To record purchases of inventory on account after discount)      

Table (1)

Working Note:

Calculate the amount of accounts payable.

Purchases = $40,000

Discount Percentage = 2%

Amount of accounts payable} = PurchasesDiscount=

(2)

To determine

To Describe: The journal entry for freight charges paid.

(3)

To determine

To Describe: The journal entry for purchase returned.

(4)

To determine

To Describe: The journal entry for the due amount paid.

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