Question

On April 1, Angela who owns a jewelry store purchased precious stones worth P75,000 from a jewelry wholesaler. Terms: 3/20, n/40. On receiving the goods, Angela checked against the order and found that P5,000 worth of stones were defective. These were returned on April 5 with an accompanying P20,000 check for a partial payment. On April 10, Angela borrowed P50,000 from BPI and issued a 30 day 18% promissory note. She immediately paid the jewelry supplier with the borrowed money. On May 10, a check was issued to BPI for the payment of the note plus interest.

Entries to record the transactions in the books of Angela.

Answer 1

Angela purchased precious stones on credit, returned defective ones, made a partial payment, borrowed money to pay the supplier, and paid off the loan with interest. Transactions recorded would include purchases, returns, partial payments, note payable, and accrued interest.

Step-by-step explanation:

On April 1, Angela, the owner of a jewelry store, made a significant purchase of precious stones for P75,000 with payment terms 3/20, n/40. These terms imply that Angela can take a 3% discount if she pays within 20 days, otherwise the net amount is due in 40 days.

However, upon inspection, she discovered P5,000 worth of defective stones, which were promptly returned on April 5. Alongside the return, she made a partial payment of P20,000. Then, on April 10, Angela took a loan of P50,000 from BPI at an 18% annual interest rate with a promissory note that is due in 30 days. The loan was used to pay off the remaining balance to the jewelry supplier. On May 10, Angela settled her debt with BPI by issuing a check for the principal amount along with the accrued interest.

The entries to record these transactions would likely include a purchase account entry for P75,000, a return account entry for P5,000, cash payments, a note payable entry for the loan, and an interest expense entry upon repayment of the promissory note with interest. The interest amount can be calculated by applying the 18% annual rate to the P50,000 loan for the 30-day period it was outstanding.