Question

Prepare the journal entries to record the following purchase transactions on Flounder Inc.’s books, assuming a periodic inventory system is used. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to the nearest whole dollar, e.g. 5,275.)

Jan. 2		Flounder purchased goods for $48,400 from Fundy Corp., terms 2/10, n/45, FOB destination.
5		The appropriate company paid freight costs of $700.
6		Flounder returned $5,600 of the goods purchased on January 2, because they were not needed.
11		Flounder paid the balance owed to Fundy.

Answer 1

Journal

Date	Account title	Debit	Credit
Jan 2	Purchases	48,400
	Accounts payable - Fundy Corp.		48,400
Jan 5	No entry required
Jan 6	Accounts payable - Fundy Corp.	5,600
	Purchase returns and allowances		5,600
Jan 11	Accounts payable - Fundy Corp.	42,800
	Cash		41,944
	Purchase discount		856

Final amount due = Cost of goods purchased - Cost of goods returned

= 48,400 - 5,600

= $42,800

Discount amount = Final amount due x Discount percentage

= 42,800 x 2/10

= $856

Cash payment to be made = Final amount due - Discount amount

= 42,800 - 856

= $41,944

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