Question

Unite Inc. maintains a periodic inventory system and uses the gross method to record purchases. The following transactions occurred during the month of March 2020 for its major inventory line.

a. Purchase of merchandise inventory on March 1, 2020, for $14,400 on account, terms 1/10, n/30.

b. Paid $144 cash for freight charges on March 1, 2020, related to the purchase.

c. Returned $108 of merchandise on March 5, 2020, and received a credit from the vendor.

d. Paid the balance due to the vendor on March 8, 2020.

e. Sold merchandise inventory on March 15, 2020, for $9,000.

Prepare journal entries for transactions a through e.

Note: Round your answers to the nearest whole dollar.

Answer 1

a.

To record entry for inventory purchase in terms of credit is:

A. B C D Journal Entry 1 Debit Date Particulars Credit 2. 3 March 1, 2020 Inventory $14,400 $14,400 To Accounts Payable (To record purchase of merchandise inventory in credit) 4 5 LO

b.

To record entry for freight charges is:

A D Journal Entry Date Particulars Debit Credit 8 9 March 1, 2020 Freight $144 $144 To Cash 10 (To record freight charges) 11

c.

To record entry for merchandise inventory returned is:

A D Journal Entry 13 Credit Date Particulars Debit 14 Accounts Payable To Inventory (To record merchandise returned) $108 15 March 5, 2020 $108 16 17 LO

d.

To record entry for balance payment of inventory purchased is:

A D Journal Entry 19 Date Particulars Debit Credit 20 $14,292 Accounts Payable 21 March 8, 2020 $14,149 $143 To Cash 22 To Discount 23 (To record balance payment) 24

Working Notes:

1.

Computation of accounts payable is:

Accounts payable = Total purchase amount of inventory - Amount of purchased returned

= $14,400 - $108

= $14,292

Hence, the accounts payable is $14,292.

2.

Computation the amount of discount is:

Amount of discount = Accounts payable * Percentage of discount

= $14,292 * 0.01

= $143

Hence, the amount of discount is $143.

3.

Computation the amount of cash is:

Amount of cash = Accounts payable - Amount of discount

= $14,292 - $143

= $14,149

Hence, the amount of cash is $14,149.

e.

To record entry for sales of inventory is:

A D Journal Entry 26 Date Particulars Debit Credit 27 28 March 15, 2020 Cash $9,000 S9,000 To Sales Revenue 29 (To record sales of inventory in cash) 30