Question

June 4 Wildhorse Company purchased $9,200 worth of merchandise, terms n/30 from Hayes Company. The cost of the merchandise was $5,700. 12 Wildhorse returned $550 worth of goods to Hayes for full credit. The goods had a cost of $390 to Hayes. 12 Wildhorse paid the account in full. Assume use of the perpetual inventory system for both companies. Prepare the journal entries to record these transactions in Wildhorse’s books.

Answer 1

Answer and Explanation:

The Journal entry is shown below:-

On June 4

Merchandise Inventory Dr, $9,200

To Accounts payable $9,200

(Being credit purchase is recorded)

To record the credit purchase we simply debited the merchandise inventory as it increased the assets and we credited the accounts payable as it also increased the liabilities

On June 12

Accounts payable Dr, $550

To Merchandise inventory $550

(Being purchase return is recorded)

Here to record the purchase return we simply debited the accounts payable as it reduced the liabilities and we credited the merchandise as it also reduced the assets

On June 12

Accounts payable Dr, $8,650 ($9,200 - $550)

To Cash $8,650

(Being payment on account is recorded)

Here to record the payment on account we simply debited the accounts payable as it reduced the liabilities and we credited the cash as it also reduced the assets