Question

Purchase-Related Transactions

Journalize entries for the following related transactions of Lilly Heating & Air Company:

1. Purchased $25,000 of merchandise from Schell Co. on account, terms 2/10, n/30.
2. Paid the amount owed on the invoice within the discount period.
3. Discovered that $5,000 before purchases discount of the merchandise was defective and returned items, receiving credit.
4. Purchased $3,900 of merchandise from Schell Co. on account, terms n/30.
5. Received a check for the balance owed from the return in (c), after deducting for the purchase in (d).

Answer 1

Lilly Heating & Air Company Journal Enteries Trans Particulars Debit in $ Credit in $ a. Inventory a/c Dr. 24500 To Accounts Payable - Schell Co. 24500 (Inventory on account) 25000 - 25000 x 2%) b. 24500 Accounts Payable - Schell Co. a/c Dr. To Cash (Creditors paid) 24500 4900 Accounts Payable - Schell Co. a/c Dr. To Inventory (Defectives returned) 5000 - (5000 x 2%) 4900 d. 3900 Inventory a/c Dr. To Accounts Payable - Schell Co. (Inventory on account) 3900 e. 1000 Cash a/c Dr. To Accounts Payable - Schell Co. (Cash for refund) 4900 - 3900 = 1000 1000