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Intermediate Accounting: Reporting...

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

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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RE7-8 Johnson Company uses a perpetual inventory system. On October 23, Johnson purchased $100,000 of inventory on credit with payment terms of 1/15, net 45. Using the net price method, prepare journal entries to record Johnson’s purchases on October 23 and the subsequent payment on October 31.

Using the information from RE7-8, prepare journal entries to record Johnson’s purchase on October 23 and the subsequent payment on November 30.

To determine

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

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 J on October 23:

DateAccount TitleDebit ($)Credit ($)
October 23Inventory$99,000  
 Accounts Payable $99,000
 (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. Hence, the Accounts payable account is credited...

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