Question

Feb. 3 Purchased $3,600 of merchandise inventory on account under terms 1/10, nEOM and FOB shipping point.

 7 Returned $800 of defective merchandise purchased on February 3

 9 Paid freight bill of $100 on February 3 purchase.

 10 Sold merchandise inventory on account for $4,500. Payment terms were 3/15, n/30. These goods cost the company $2,250. and the discount debt

 12 Paid amount owed on credit purchase of February 3, less the return

 28 Received cash from February 10 customer in full settlement of their debt.

Answer 1

Entries to be made in the books of accounts chronologically :

Feb. 03 Purchase A/c............Dr. $3,600

To Trade Creditors A/c $3,600

(Being inventory purchased on account)

Feb. 07 Trade Creditors A/c....Dr. $800

To Purchase return A/c $800

(Being goods returned as defectives)

Feb. 09 Freight inward A/c.....Dr. $100

To Cash A/c $100

(Being freight paid for goods purchased on

Feb. 03)

Feb. 10 Trade Debtor A/c......Dr. $4,500

To Sales A/c $4,500

(Being goods sold on account)

Feb. 12 Trade Creditors A/c...Dr. $2,772

To Cash A/c $2,772

(Being payment made to trade creditor

for the purchases made on Feb. 03 I.e $2,772

Net of return and 01% discount due to payment within 10 days of invoice date($3600 - $800 = $2,800. 1% of $2800 = $28. Net to be paid = $2800 - $28 = $2772))

Feb. 28 Cash A/c....................Dr. $4,500

To Trade Debtor A/c $4500

(Being payment received for sales made on

Feb. 10. No discount allowed as the payment has not been made within 15 days of invoice date I.e. Feb. 10)