BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 6, Problem 6.7APR
Textbook Problem

Purchase-related transactions using periodic inventory system

Selected transactions for Capers Company during October of the current year are listed in Problem 6-1A.

Instructions

Journalize the entries to record the transactions of Capers Company for October using the periodic inventory system.

Expert Solution
To determine

Periodic Inventory System: It is a system in which the inventory is updated in the accounting records on a periodic basis such as at the end of each month, quarter or year. In other words, it is an accounting method which is used to determine the amount of inventory at the end of each accounting period.

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

To Record: The purchase transactions under periodic inventory system.

Explanation of Solution

Record the journal entry in the books of Company C.

Journal Entry
Date Account Title and Explanation Post Ref. Debit ($) Credit ($)
October 1 Purchases 14,448
Accounts Payable 14,448
(To record purchases of inventory on account)

Table (1)

Explanation:

  • Purchases account is an expense and it is decreased the equity value by $14,448. Therefore, debit purchase 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 for purchases of inventory along with freight charges.

Journal Entry
Date Account Title and Explanation Post Ref. Debit ($) Credit ($)
October 3 Purchases 9,950
Freight-In 220
Accounts Payable 10,170
(To record the payment of freight charges)

Table (2)

Explanation:

  • Purchases account is an expense and it is decreased the equity value by $9,950. Therefore, debit purchase account with $9,950.
  • Freight-In is an expense and it is increased by $220. Therefore, debit freight-in account with $220.
  • Accounts payable is a liability and it is increased by $10,170. Therefore, credit accounts payable account with $10,170.

Record the journal entry for purchases of inventory.

Journal Entry
Date Account Title and Explanation Post Ref. Debit ($) Credit ($)
October 4 Purchases 13,650
Accounts Payable 13,650
(To record purchases of inventory on account)

Table (3)

Explanation:

  • Purchases account is an expense and it is decreased the equity value by $13,650. Therefore, debit purchase account with $13,650.
  • Accounts payable is a liability and it is increased by $13,650. Therefore, credit accounts payable account with $13,650.

Record the journal entry for purchase returned.

Journal Entry
Date Account Title and Explanation Post Ref.

Debit

($)

Credit

($)

October 6 Accounts Payable 4,550
Purchases Returns and Allowances 4,550
(To record the purchases return)

Table (4)

Explanation:

  • Accounts payable is a liability and it is decreased by $4,550. Therefore, debit accounts payable account with $4,550.
  • Purchases returns and allowances account is an expense and it is increased the equity value by $4,550. Therefore, credit purchases returns and allowances account with $4,550.

Record the journal entry for the due amount paid.

Journal Entry
Date Account Title and Explanation Post Ref.

Debit

($)

Credit

($)

October 13 Accounts Payable 10,170 (1)
       Purchase Discount 199 (2)
       Cash 9,971 (3)
(To record paying cash on purchases after discounts and returns)

Table (5)

Working Notes:

Calculate accounts payable amount.

Purchases = $9,950

Freight paid = 220

Accounts payable = Purchase + Freight paid=$9,950$220=$10,170 (1)

Calculate purchase discount.

Accounts payable = $9,950

Discount percentage = 2%

Purchase discount = $9,950 × 2100 = $199 (2)

Calculate cash paid.

Accounts payable = $9,950

Purchase discount = $199 (2)

Freight paid = 220

Cash paid = (Accounts payable, net – Purchase discount)+Freightcharges($9,950 – $199)+$220= $9,971 (3)

Explanation:

  • Accounts payable is a liability and it is decreased by $10,170. Therefore, debit accounts payable account with $10,170.
  • Purchase discount is an income and it is increased the equity value by $199. Therefore, credit purchase discount account with $199.
  • Cash is an asset and it is decreased by $9,971. Therefore, credit cash account with $9,971.

Record the journal entry for the due amount paid.

Journal Entry
Date Account Title and Explanation Post Ref.

Debit

($)

Credit

($)

October 14 Accounts Payable 9,100 (4)
       Purchase Discount 182 (5)
       Cash 8,918 (6)
(To record paying cash on purchases after discounts and returns)

Table (6)

Working Notes:

Calculate accounts payable amount.

Purchase = $13,650

Purchase returns = $4,550

Accounts payable = Purchase – Purchase returns=$13,650$4,550=$9,100 (4)

Calculate purchase discount

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Chapter 6 Solutions

Accounting
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