Question

Exercise 6-1 This information relates to Blossom Co.. 1. On April 5, purchased merchandise from Sunland Company for $26,200 on account. 2. On April 7, purchased equipment on account for $34,500. 3. On April 8, returned $3,900 of April 5 merchandise to Sunland Company. 4. On April 15, paid the amount due to Sunland Company in full.

Answer 1

Assets Cash I $ + Inv. 26,200 April 5 April 7 April 8 April 15 = Liabilities Stockholders' Equity Retained Earnings + Equipment = Accts. Pay. | + Common Stock + Rev. - Exp. $ 26,200 $ 34,500 $ 34,500 $ (3,900) $ (22,300) $ (3,900) $ (22,300) April 15 = $ 26,200 - $ 3,900 returns Notes: April 5 April 7 April 8 April 15 For purchase of merchandise on account, inventory account should be debited and Accounts payable accounts should be credited. For purchase of equipment on account, Equipment account should be debited and Accounts payable accounts should be credited. For returns of merchandise, Accounts payable account should be debited and inventory should be credited. Hence, both are negative. For payment of merchandise, net amount as calculated is paid. Accounts payable should be debited and Cash should be credited.