Question

On June 10, Crane Company purchased $9,000 of merchandise on account from Pronghorn Company, FOB shipping point, terms 2/10, n/30. Crane pays the freight costs of $550 on June 11. Damaged goods totaling $350 are returned to Pronghorn for credit on June 12. The fair value of these goods is $80. On June 19, Crane pays Pronghorn Company in full, less the purchase discount. Both companies use a perpetual inventory system.

Prepare separate entries for each transaction on the books of Tuzun Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit

Answer 1

Crane Company journals:

Inventory 9000

Accounts Payable 9000

--to record purchase--

Inventory 550

Cash 550

--to record payment of freights--

Accounts Payable 350

Inventory 350

--to record returned goods--

Accounts Payable 8650

Inventory 173

Cash 8477

--to record payment within discount--

Step-by-step explanation:

at purchase we take a liability with the supplier, then the return goods decrease our liability as we are liable for a lower amount.

At payment date:

account balance:

9,000 nominal - 350 return = 8,650

discount:

8,650 nominal x 2% = 173

net: 8,650 nominal - 173 discount = 8,77