Question

This information relates to Pharoah Co..

1. On April 5, purchased merchandise from Cullumber Company for $28,600, terms 4/10, n/30.
2. On April 6, paid freight costs of $580 on merchandise purchased from Cullumber Company.
3. On April 7, purchased equipment on account for $32,000.
4. On April 8, returned $3,500 of April 5 merchandise to Cullumber Company.
5. On April 15, paid the amount due to Cullumber Company in full.
Prepare the journal entries to record the transactions listed above on Pharoah Co.'s books. Pharoah Co. uses a perpetual inventory system.

Answer 1

Answer and Explanation:

The journal entries are shown below:

On April 5

Inventory Dr $28,600.00

To Accounts payable $28,600.00

(Being purchase of inventory on account is recorded)

On April 6

Inventory Dr $580.00

To Cash $580.00

(Being freight payment is recorded)

On April 7

Equipment Dr $32,000.00

To Accounts payable $32,000.00

(Being purchase of equipment is recorded)

On April 8

Accounts payable Dr $3,500.00

To Inventory $3,500.00

(Being purchase returns is recorded)

On April 15

Accounts payable Dr $25,100.00 ($28,600- $3,500)

To Cash $24,096.00

To Inventory $1,004.00 ($25,100 × 4%)

(Being payment to the supplier is recorded)