Question

On March 1, Warwick’s Co., a women’s clothing store, purchased $73,600 of merchandise from a supplier on account, terms FOB destination, 2/10, n/30. On March 5, Warwick’s returned $8,700 of the merchandise, receiving a credit memo, and then paid the amount due on March 9, within the discount period. Journalize Warwick’s entries to record (a) the purchase, (b) the merchandise return, and (c) the payment. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Step-by-step explanation:

The journal entries are shown below:

(A) Merchandise Inventory A/c $72,128

To Accounts payable A/c $72,128

(Being inventory purchased on credit)

The computation is shown below:

= $73,600 - $73,600 × 2%

= $73,600 - $1,472

= $72,128

(B) Account payable A/c Dr $8,526

To Merchandise inventory A/c $8,526

(Being returned inventory is recorded)

The computation is shown below:

= $8,700 - $8,700 × 2%

= $8,700 - $174

= $8,526

(C) Accounts payable A/c Dr $63,602

To Cash A/c $63,602

(Being due amount is paid and)

The computation is shown below:

= ($73,600 - $8,700) - ($73,600 - $8,700) × 2%

= $64,900 - $64,900 × 2%

= $64,900 - $1,298

= $63,602