Question

This information relates to Shamrock Co.

 1. On April 5, purchased merchandise from Pharoah Company for $28,600, terms 4/10,n/30.

 2. On April 6, paid freight costs of $580 on merchandise purchased from Pharoah.

 3. On April 7, purchased equipment on account for $32,000.

 4. On April 8, returned $3,500 of April 5 merchandise to Pharoah Company.

 5. On April 15, paid the amount due to Pharoah Company in full.

(b) 

Assume that Shamrock Co. paid the balance due to Pharoah Company on May 4 instead of April 15. Prepare the journal entry to record for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) 

Answer 1

(a)

1.

To record entry for purchase merchandise on account is:

2.

To record entry for freight charges is:

3.

To record entry for purchase equipment on account is:

4.

To record entry for returned of purchase is:

5.

To record entry for payment of inventory is:

Working Notes:

1.

Computation of accounts payable is:

Accounts payable = Purchase of inventory - Inventory returned

= $28,600 - $3,500

= $25,100

Hence, the accounts payable is $25,100.

2.

Computation the amount of discount for inventory is:

Amount of discount for inventory = Accounts payable * Percentage of discount

= $25,100 * 0.04

= $1,004

Hence, the amount of discount for inventory is $1,004.

3.

Computation the amount of cash is:

Amount of cash = Accounts payable - Amount of discount for inventory

= $25,100 - $1,004

= $24,096

Hence, the amount of cash is $24,096.

(b)

To record entry for payment of inventory is:

Working Notes:

Computation of accounts payable is:

Accounts payable = Purchase of inventory - Inventory returned

= $28,600 - $3,500

= $25,100

Hence, the accounts payable is $25,100.