Question

Information related to Pharoah Company is presented below.

a. On April 5, purchased merchandise on account from Riverbed Company for $28,800, terms 3/10, net/30, FOB shipping point.
b. On April 6, paid freight costs of $900 on merchandise purchased from Riverbed.
c. On April 7, purchased equipment on account for $29,000.
d. On April 8, returned $3,400 of merchandise to Riverbed Company.
e. On April 15, paid the amount due to Riverbed Company in full.

Required:
Prepare the journal entries to record these transactions on the books of Kerber Co. under a perpetual inventory system.

Answer 1

The transactions for Pharoah Company in a perpetual inventory system are recorded in several journal entries dated from April 5 to April 15. The entries involve debiting and crediting the Inventory, Equipment, Accounts Payable, and Cash accounts in accordance with the details of each transaction including purchases, freight costs, returns, and payments.

Step-by-step explanation:

The subject question involves recording transactions in a perpetual inventory system for Pharoah Company (erroneously referred to as Kerber Co. in the question).

Journal Entries for Pharoah CompanyApril 7: Debit Equipment $29,000; Credit Accounts Payable $29,000

April 15: Compute the payable after returns: $28,800 - $3,400 = $25,400. Calculate discount ($25,400 * 3%) = $762. Payable after discount: $25,400 - $762 = $24,638.
Debit Accounts Payable $25,400; Credit Inventory $762; Credit Cash $24,638

Note that the April 15 entry accounts for the discount offered by Riverbed Company under the terms 3/10, net/30, since the payment was made within the 10-day discount period.

Answer 2

April 5

Dr Inventory $28,800

Cr Accounts Payable $28,800

April 6

Dr Inventory $900

Cr Cash $900

April 7

Dr Equipment $29,000

Cr Accounts Payable $29,000

April 8

Dr Accounts Payable $3,400

Cr Inventory credit $3,400

April 15

Dr Accounts Payable 25,400

Cr Cash 24,638

Cr Inventory 762

Step-by-step explanation:

Preparation of the journal entries to record these transactions on the books of Kerber Co. under a perpetual inventory system

April 5

Dr Inventory $28,800

Cr Accounts Payable $28,800

April 6

Dr Inventory $900

Cr Cash $900

April 7

Dr Equipment $29,000

Cr Accounts Payable $29,000

April 8

Dr Accounts Payable $3,400

Cr Inventory credit $3,400

April 15

Dr Accounts Payable 25,400

($28,800 - 3,400)

Cr Cash 24,638

(25,400-762)

Cr Inventory 762

(25400 * 0.03 )