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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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RE7-6 Stevens Company uses a perpetual inventory system. On July 10, Stevens purchases $50,000 of inventory on credit with payment terms of 2/10, net 30. Using the gross price method, prepare journal entries to record Stevens’s purchases on July 10 and the subsequent payment on July 18.

Using the information in RE7-6, prepare journal entries to record Stevens Company’s purchases on July 10 and the subsequent payment on August 8.

To determine

Journalize the entries for the purchases and payment made by Company S.

Explanation

Journal entry:

Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Journalize the entries for the purchases made by Company S on July 10:

DateAccount TitleDebit ($)Credit ($)
July 10Inventory$50,000  
 Accounts Payable $50,000
 (To record the purchases made)  

Table (1)

  • Goods are purchased on account and thus the asset is increased. Hence, the Inventory account is debited.
  • As goods are purchased on account, the current liabilities are increased...

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