Question

On June 10, Metlock Company purchased $6,300 of merchandise from Ivanhoe Company, on account, terms 3/10, n/30. Metlock pays the freight costs of $390 on June 11. Goods totaling $300 are returned to Ivanhoe for credit on June 12. On June 19, Metlock Company pays Ivanhoe Company in full, less the purchase discount. Both companies use a perpetual inventory system. Part A. Prepare separate entries for each transaction on the books of Purcey Company

Part B. Prepare separate entries for each transaction for Guyer Company. The merchandise purchased by Purcey on June 10 cost Guyer $2,430, and the goods returned cost Guyer $260.

Answer 1

Metlock Company

Inventory 6,300 debit

Accounts Payables 6,300 credit

--to record purchase--

Inventory 390 debit

Cash 390 credit

--to record payment of freight--

Accounts Payable 300 debit

Inventory 300 credit

--return of inventory--

Accounts Payable 6,000 debit

Inventory 180 credit

Cash 5,820 credit

--payment within discount period--

Ivanhoe Company

Accounts Receivables 6,300 debit

Sales Revenues 6,300 credit

COGS 2,430 debit

Inventory 2,430 credit

--to record sale and cost of the goods sold--

Sales Returns 300 debit

Accounts Receivable 300 credit

Inventory 260 debit

Accounts Receivables 260 credit

--to record returned goods from Metlock--

Sales Discount 180 debit

Cash 5,820 debit

Accounts Receivables 6,000 credit

--to record collection within discount period--

Step-by-step explanation:

Account balance at payment date:

6,300 nominal less 300 return = 6,000

Discount of 3% within first 10 days:

6,000 nominal x 3% = 180 dollars

Net: 6,000 nominal - 180 discount = 5,820 dollars