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9 June, 23:53

Nov. 5 Purchased 1,100 units of product at a cost of $40 per unit. Terms of the sale are 5/10, n/60; the invoice is dated November 5.

Nov. 7 Returned 25 defective units from the November 5 purchase and received full credit.

Nov. 15 Paid the amount due from the November 5 purchase, minus the return on November 7.

Prepare the journal entries to record each of the above purchases transactions of a merchandising company. Assume a perpetual inventory system.

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  1. 10 June, 00:09
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    November 5 - Purchase = 1100

    Unit cost = $40

    Payable = (1,100*40) 44000

    November 7

    Returns - 25 defective units = 25*40 = 1000

    Terms of sale = 5/10, n/60

    If invoices are paid within 10 days, a discount of 5% is given.

    Therefore payment on November 15 attracts a discount of 5% of the net purchase

    Journal entries

    Date Description Debit Credit

    November 5 Inventory 44,000

    Accounts payable 44,000

    November 7 Accounts payable 1000

    Inventory 1000

    November 15 Accounts payable 43,000

    Inventory (discount) 2,150

    Cash 40,850
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