Purchase-Related Transactions Skycrest Co., a furniture wholesaler, sells mercha

Question

Purchase-Related Transactions

Skycrest Co., a furniture wholesaler, sells merchandise to Boyle Co. on account, $34,200, terms 1/10, n/30. The cost of the merchandise sold is $20,500. Skycrest Co. issues a credit memo for $6,200 for merchandise returned and subsequently receives the amount due within the discount period. The cost of the merchandise returned is $3,700.

a. Journalize Boyle Co.'s entry for the purchase.

b. Journalize Boyle Co.'s entry for the return of the merchandise for credit.

c. Journalize Boyle Co.'s entry for the payment of the invoice within the discount period. For a compound transaction, if an amount box does not require an entry, leave it blank.

Explanation / Answer

Journal Entry For Purchase:

Purchase           A/c Dr   34200

To Skycrest Co A/c                       34200

(Being purchase made from Skycrest)

Journal Entry For Purchase Return:

Skycrest A/c Dr 6200

To Purchase Return A/c                6200

(Being goods worth 6200 returned)

Balance payable to Skycrest = 34200 - 6200 = 28000

The term 1 / 10 means that if payment is made within the discount period of 10 days, then there is a discount of 1%

Discount received = 28000 * 1% = 280

Journal Entry For payment:

Skycrest                  A/c Dr 34200

To Discount received A/c                    280

To Cash                   A/c                  27720

(Being payment made within 10 days)

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