Question

Information related to Harwick Co. is presented below.

1. On April 5, purchased merchandise on account 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.

Required:

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

No. Date Account Titles and Explanation Debit Credit

1.

2.

3.

4.

5.

Answer 1

1.

Apr 5

DR Merchandise inventory $23,000

CR Account payable $23,000

(To record Merchandise Purchased)

2.

Apr 6

DR Merchandise inventory $900

CR Cash $900

(To record payment of Freight Costs for Purchases)

3.

Apr 7

DR Equipment $26,000

CR Account payable $26,000

(To record purchase of Equipment)

4.

Apr 8

DR Account payable $3,000

CR Merchandise inventory $3,000

(To record return of damaged Merchandise)

5.

Apr 15

DR Account payable $20,000

CR Cash $19,600

CR Merchandise inventory $200

(To record payment for Merchandise bought on account)

Working

Terms of purchase 2/10 indicate that discount of 2% is warranted if goods paid for in 10 days which they were;

= 20,000 * ( 1 - 2%)

= $19,600