Question

ES 4 Olaf Corp uses a perpetual inventory system. The company bad the following inventory transactions in April Apr. 3 Purchased merchandise from DeVito Lid. for $28.000 terms 1/10, 1/30 FOB shipping! point 6 The appropriate company paid freight costs of $700 on the merchandise purchased on April 3 7 Purchased supplies on account for $5.000 8 Returned damaged merchandise to DeVito and was given a purchase allowance of $3.500. The merchandise was repaired by DeVito and returned to inventory for future resale. 30 Paid the amount due to DeVito in full. Instructions (a) Record the above transactions in Olafs books (b) Assume that Olaf paid the balance due to DeVito on April 12 instead of April 30. Prepare the journal entry to record this payment on Olaf's books stions E5-5 Refer to the information in E5-4 for Olaf Corp. and the following additional information: 1. The cost of the merchandise sold on April 3 was $19.000 2. The cost of the merchandise returned on April 8 was $2,300 3. DeVito uses a perpetual inventory system. Instructions (a) Record the transactions in the books of DeVito (b) Assume that DeVito received the balance due from Olaf on April 12 instead of April 30. Prepare the journal entry record this collection on DeVito's books.

Answer 1

5-4 a) Journal entry

Date	account and explanation	Debit	Credit
Apr 3	Merchandise inventory	28000
	Account payable-DeVito		28000
Apr 6	Merchandise inventory	700
	Cash		700
Apr 7	Supplies	5000
	Account payable		5000
Apr 8	Account payable-DeVito	3500
	Merchandise inventory		3500
Apr 30	Account payable-DeVito (28000-3500)	24500
	Cash		24500

b) Journal entry

Date	account and explanation	Debit	Credit
Apr 12	Account payable-DeVito (28000-3500)	24500
	Cash		24255
	Merchandise inventory		245

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