Question

Exercise 5-3

Oriole Stores is a new company that started operations on March 1, 2021. The company has decided to use a perpetual inventory system. The following purchase transactions occurred in March:

Mar. 1		Oriole Stores purchases $9,400 of merchandise for resale from Octagon Wholesalers, terms 2/10, n/30, FOB shipping point.
2		The correct company pays $150 for the shipping charges.
3		Oriole returns $1,000 of the merchandise purchased on March 1 because it was the wrong colour. Octagon gives Oriole a $1,000 credit on its account.
21		Oriole Stores purchases an additional $12,500 of merchandise for resale from Octagon Wholesalers, terms 2/10, n/30, FOB destination.
22		The correct company pays $195 for freight charges.
23		Oriole returns $300 of the merchandise purchased on March 21 because it was damaged. Octagon gives Oriole a $300 credit on its account.
30		Oriole paid Octagon the amount owing for the merchandise purchased on March 1.
31		Oriole paid Octagon the amount owing for the merchandise purchased on March 21.

1) Prepare Oriole Stores' journal entries to record the above transactions.

2) Post the transactions to the Merchandise Inventory account. Compare the total in this account with the total of the cash paid during March by Oriole for the purchase of inventory. (Note: Assume there were no sales of inventory in March.)

Answer 1

Please hit LIKE button if this helped. Part 1 Date Credit Debit $ 9,400 Mar 1 Account Merchandise Inventory Accounts Payable Mar 1 $ 9,400 Mar 2 $ 150 Merchandise Inventory Cash Mar 2 $ 150 Mar 3 $ 1,000 Accounts Payable Merchandise Inventory Mar 3 $ 1,000 $ 12,500 Mar 21 Mar 21 Merchandise Inventory Accounts Payable $ 12,500 Mar 22 (FOB destination point means the seller pays the freight, therefore no entry required Mar 23 $ 300 Accounts Payable Merchandise Inventory Mar 23 $ 300 Mar 30 $ 8,400 Accounts Payable ($9,400 - $1,000) Cash Mar 30 $ 8,400 $ 12,200 Mar 31 Mar 31 Accounts Payable ($12,500-$300) Merchandise Inventory ($12,200*2%) Cash $ 244 $ 11,956 Part 2 Mar 1 Merchandise Inventory Debit Credit 9,400 Mar 3 $ 1,000 150 Mar 23 $ 300 12,500 Mar 31 $ 244 20,506 $ $ $ $ Mar 2 Mar 21 Cash Payment: Mar 2 Mar 30 $ 150 $ 8,400 $ 11,956 $ 20,506 Mar 31