Question

Novak Corporation uses a periodic inventory system and the gross method of accounting for purchase discounts. (a) On July 1. (1) Novak purchased $67,000 of inventory, terms 2/10, 1/30, FOB shipping point (2) Novak paid freight costs of $1,250. (b) On July 3, Novak returned damaged goods and received credit of $6,700. (c) On July 10, Novak paid for the goods. Prepare all necessary journal entries for Novak. (If no entry is required, select "No Entry for the account tities and enter for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Record journal entries in the order presented in the problem.) No. Date Account Titles and Explanation Debit Credit (a) (1)

Answer 1

Credit Date July 1 Accounts Titles and Explanation Purchases Accounts Payable Debit $67,000 $67,000 $ 1.250 Freight in Cash $ 1.250 July. 3 $ 6,700 Accounts payable Purchase Returns and Allowences $ 6,700 July. 10 $60,300 Accounts Payable Cash Purchase Discounts $ 59,094 $ 1,206 Working Notes: Accounts Payable = $67,000-$6,700 = $60,300 Purchase Discounts = $60,300*2%= $1.206 Csah = $60,300-$1,206 = $59,094