Question

Information related to Harwick Co. is presented below.

A. Prepare the journal entries to record these transactions on the books of Harwick Co. under a perpetual inventory system.

B. Assume that Harwick Co. paid the balance due to Botham Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

1. On April 5, purchased merchandise from Botham Company for $23,000, terms 2/10, net/30, FOB shipping point.
2. On April 6, paid freight costs of $900 on merchandise purchased from Botham.
3. On April 7, purchased equipment on account for $26,000.
4. On April 8, returned damaged merchandise to Botham Company and was granted a $3,000 credit for returned merchandise.
5. On April 15, paid the amount due to Botham Company in full.
E5-2 General Journal
Date Account Titles Debit Credit
(a)
Apr. 5
6
7
8
15
(b)
May 4

Answer 1

A.

April 5

Dr Merchandise inventory $23,000

Cr Accounts payable $23,000

April 6

Dr Merchandise inventory $900

Cr Cash $900

April 7

Dr Equipment $26,000

Cr Accounts payable $26,000

April 8

Dr Accounts payable $3,000

Cr Merchandise inventory $3,000

April 15

Dr Accounts payable $20,000

Cr Cash $19,600

Cr Merchandise inventory $400

B. Dr Accounts payable $20,000

Cr Cash $20,000

Step-by-step explanation:

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

April 5

Dr Merchandise inventory $23,000

Cr Accounts payable $23,000

April 6

Dr Merchandise inventory $900

Cr Cash $900

April 7

Dr Equipment $26,000

Cr Accounts payable $26,000

April 8

Dr Accounts payable $3,000

Cr Merchandise inventory $3,000

April 15

Dr Accounts payable $20,000

($23,000-$3,000)

Cr Cash $19,600

[$20,000*(100%-2%)]

Cr Merchandise inventory $400

($20,000-$19,600)

B. Preparation of the journal entry to record this payment Assume that Harwick Co. paid the balance due to Botham Company on May 4 instead of April 15.

May 4

Dr Accounts payable $20,000

Cr Cash $20,000

($23,000-$3,000)