Question

Stylon Co., a women’s clothing store, purchased $73,000 of merchandise from a supplier on account, terms FOB destination, 2/10, n/30, using the net method under a perpetual inventory system. Stylon returned merchandise with an invoice amount of $9,900, receiving a credit memo.

Journalize Stylon’s entries to record (a) the purchase, (b) the merchandise return, (c) the payment within the discount period of 10 days, and (d) the payment beyond the discount period of 10 days. Refer to the Chart of Accounts for exact wording of account titles. For grading purposes use December 31 as the date for all transactions.

CHART OF ACCOUNTS
Stylon Co.
General Ledger
ASSETS 110 Cash 120 Accounts Receivable 125 Notes Receivable 130 Inventory 131 Estimated Returns Inventory 140 Office Supplies 141 Store Supplies 142 Prepaid Insurance 180 Land 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 194 Office Equipment 195 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 216 Salaries Payable 218 Sales Tax Payable 219 Customer Refunds Payable 220 Unearned Rent 221 Notes Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends	REVENUE 410 Sales 610 Rent Revenue EXPENSES 510 Cost of Goods Sold 521 Delivery Expense 522 Advertising Expense 524 Depreciation Expense-Store Equipment 525 Depreciation Expense-Office Equipment 526 Salaries Expense 531 Rent Expense 533 Insurance Expense 534 Store Supplies Expense 535 Office Supplies Expense 536 Credit Card Expense 539 Miscellaneous Expense 710 Interest Expense

Answer 1

Date	Account title	Debit	credit
a	Inventory	71540
	Accounts Payable [73000(1-.02)]		71540
	[Being inventory net of discount if payment made within discount period amounting to 2% recorded]
b	Accounts Payable	9702
	Inventory [9900(1-.02)]		9702
c	Accounts payable	61838
	cash		61838
	[being payment to accounts payable due :71540-9702 = 61838 made within discount period]
d	Inventory	1262
	Accounts payable		1262
	[being discount forfeited ]
d-2	Accounts payable	63100
	cash		63100

d-1)Net amount due for payment =71540-9702=61838 .This amount is net of discount so gross amount = 61838/(1-.02) = 63100

Discount forfeited = Gross amount *discount %

                 = 63100 *2%

                = 1262