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21 September, 15:34

During the month of June, Ace Incorporated purchased goods from two suppliers. The sequence of events was as follows: June 3 Purchased goods for $7,900 from Diamond Inc. with terms 2/10, n/30. 5 Returned goods costing $3,000 to Diamond Inc. for credit on account. 6 Purchased goods from Club Corp. for $1,950 with terms 2/10, n/30. 11 Paid the balance owed to Diamond Inc. 22 Paid Club Corp. in full. Required: Prepare journal entries to record the transactions, assuming Ace records discounts using the net method in a perpetual inventory system. Forfeited discounts are charged to Other Operating Expenses

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  1. 21 September, 15:36
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    June 3 Purchased goods for $7,900 from Diamond Inc. with terms 2/10, n/30.

    Merchandise $7,900 Debit

    Accounts Payable $7,900 Credit

    5 Returned goods costing $3,000 to Diamond Inc. for credit on account.

    Accounts Payable $3,000 Debit

    Merchandise $3,000 Credit

    6 Purchased goods from Club Corp. for $1,950 with terms 2/10, n/30.

    Merchandise $1,950 Debit

    Accounts Payable $1,950 Credit

    11 Paid the balance owed to Diamond Inc.

    Accounts Payable $4,900 Debit

    Merchandise $98 Credit

    Cash $4,802 Credit

    22 Paid Club Corp. in full.

    Accounts Payable $1.950 Debit

    Cash $1.950 Credit

    Explanation:

    First recorded the journal entry of the purchased merchandise.

    June 3 Purchased goods for $7,900 from Diamond Inc. with terms 2/10, n/30.

    Merchandise $7,900 Debit

    Accounts Payable $7,900 Credit

    When merchandise is returned, we make the opposite entry

    5 Returned goods costing $3,000 to Diamond Inc. for credit on account.

    Accounts Payable $3,000 Debit

    Merchandise $3,000 Credit

    It's recorded again the journal entry of the purchased merchandise.

    6 Purchased goods from Club Corp. for $1,950 with terms 2/10, n/30.

    Merchandise $1,950 Debit

    Accounts Payable $1,950 Credit

    When the balance is paid it's necessary to register de discount availabe becuase the payment was within 10 days, 2/10.

    11 Paid the balance owed to Diamond Inc.

    Accounts Payable $4,900 Debit

    Merchandise $98 Credit

    Cash $4,802 Credit

    In the case of Club Corp the paid is in full because it's out of the discount period.

    22 Paid Club Corp. in full.

    Accounts Payable $1.950 Debit

    Cash $1.950 Credit
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