The following information applies to the questions displayed below.] Littleton B

Question

The following information applies to the questions displayed below.] Littleton Books has the following transactions during May. May 2 Purchases books on account from Readers Wholesale for $3,300, terms 1/10, n/30. May 3 Pays cash for freight costs of $200 on books purchased from Readers May 5 Returns books with a cost of $400 to Readers because part of the order is incorrect. May 10 Pays the full amount due to Readers. May 30 Sells all books purchased on May 2 (less those returned on May 5) for $4,000 on account.

Explanation / Answer

Date Account titles and expalantions Debit Credit May 2 Purchase $        3,300 Accounts Payable $        3,300 (To record purchase on account) May 3 Freight-in $           200 Cash $           200 (To record payment of freight) May 5 Accounts Payable $           400 Purchase returns and allownces $           400 (To record returning of inventory purchased) May 10 Accounts Payable $        2,900 Cash $        2,871 Purchase Discount $              29 (To record payment to creditors) Working: Purchase $        3,300 LessPurchase Return $           400 Net Purchase $        2,900 Discount on Payment @ 1% $              29 Net Cash paid to creditors $        2,871 Term 1/10, n/30 means that 1% discount will be allowed if payment is made within 10 days of purchase. May 30 Accounts receivable $        4,000 Sales revenue $        4,000 (To record sale of inventories) Cost of goods sold $        2,900 Purchase $        2,900 (To record cost of inventories sold)

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