Question

This information relates to Larkspur Co. 1. On April 5, purchased merchandise from Crane Company for $27,300, on account, terms 2/10, n/30. 2. On April 6, paid freight costs of $3,300 on merchandise purchased from Crane Company. 3. On April 7, purchased equipment on account for $38,300. 4. On April 8, returned $3,700 of the April 5 merchandise to Crane Company. 5. On April 15, paid the amount due to Crane Company in full. Prepare the journal entries to record these transactions on the books of Larkspur using a periodic inventory system

Answer 1

Puchases 27,300 debit

Accounts Payable 27,300 credit

--to record purchase of inventory--

Freight in 3,300 debit

Cash 3,300 credit

--to record the freight--

Equipment 38,300 debit

Accounts Payable 38,300 credit

--to record purchase of equipment--

account payable 3,700 debit

purchase returns and allowance 3,700 credit

--to record returned good to Crane Company--

accounts payable 23,600 debit

purchase returns and allowance 472 credit

Cash 23,128 credit

--to record payment to Crane Company--

purchase returns and allowance 4,172 debit

Inventory 26,428 debit

Freight in 3,300 credit

Purchases 27,300 credit

--record of inventory at the end of the month (assuming no other transaction is left to record) --

Step-by-step explanation:

record under periodic inventory system

Thus, we use discounts and allowance accounts rather than directly adjust for inventory.

purchases balance at payment date:

27,300 - 3,700 = 23,600

discount of 2% over 23,600 = 472

cash disbursement: 23,600 - 472 = 23,128

Inventory valuation:

23,128 + 3,300 freight in = 26,428