# Purchase-related transactions Journalize entries for the following related transactions of Manville Heating &amp; Air Company: a. Purchased $90,000 of merchandise from Wright Co. on account, terms 2/10, n/30. b. b .Paid the amount owed on the invoice within the discount period. c. Discovered that$ 18,000 of the merchandise purchased in (a) was defective and returned items, receiving credit for $17,640 ($18,000 − ($18,000 × 2%)|. d. Purchased$10,000 of merchandise from Wright Co. on account, terms n/30. e. Received a refund from Wright Co. for return in (c) less the purchase in (d).

### Accounting

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

### Accounting

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

#### Solutions

Chapter
Section
Chapter 6, Problem 6.8EX
Textbook Problem

## Purchase-related transactionsJournalize entries for the following related transactions of Manville Heating & Air Company: a. Purchased $90,000 of merchandise from Wright Co. on account, terms 2/10, n/30. b. b .Paid the amount owed on the invoice within the discount period. c. Discovered that$ 18,000 of the merchandise purchased in (a) was defective and returned items, receiving credit for $17,640 ($18,000 − ($18,000 × 2%)|. d. Purchased$10,000 of merchandise from Wright Co. on account, terms n/30. e. Received a refund from Wright Co. for return in (c) less the purchase in (d).

Expert Solution
To determine

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

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

### Explanation of Solution

a.

Record the purchase of merchandise inventory on account.

 Date Account Title and Explanation Post Ref. Debit ($) Credit ($) Merchandise Inventory 88,200 Accounts Payable 88,200 (1) (To record purchases of inventory on account after discount)

Table (1)

Working Note:

Calculate the amount of accounts payable.

Purchases = $90,000 Discount Percentage = 2% Amount of accounts payable} = PurchasesDiscount=Purchases(Purchases×2%)=$90,000 – ($90,000×2%)=$90,000$1,800=$88,200 (1)

Explanation:

• Merchandise inventory is an asset and it is increased by $88,200. Therefore, debit inventory account with$88,200.
• Accounts payable is a liability and it is increased by $88,200. Therefore, credit accounts payable account with$88,200.

b.

Record the journal entry for the due amount paid.

 Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) Accounts Payable 88,200 Cash 88,200 (To record paying cash on purchases after discounts and returns)

Table (2)

Explanation:

• Accounts payable is a liability and it is decreased by $88,200. Therefore, debit accounts payable account with$88,200.
• Cash is an asset and it is decreased by $88,200. Therefore, credit cash account with$88,200.

c.

Record the journal entry for purchase returned for damaged goods.

 Journal Entry Date Account Title and Explanation Post Ref. Debit ($) Credit ($) Accounts Receivable 17,640 Merchandise Inventory 17,640 (2) (To record the purchases return)

Table (3)

Working Note:

Calculate the amount of merchandise inventory returned

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