Purchase-Related Transactions Milan Co a women\'s clothing store, purchased $120

Question

Purchase-Related Transactions Milan Co a women's clothing store, purchased $120,000 of merchandise from a supplier on account erns F B destination, 2 10 n 30 Milan Co. returned S 6 000 of the merchandise, ce ga credit memorandum, and then paid the amount due within the discount period. Illustrate the effects on the accounts and financial statements of Milan Co. to record the following transactions. If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. Balance Sheet Statement of Stockholders' Income Assets Liabilities Cash Flows Equity Statement No Effect+ InventoryAccounts PayableNo Effect 120,000 X 120,0001X Statement o f Cash Flows Income Statement No effect No effect No effect No effect

Explanation / Answer

Transaction a --- The Purchase

The amount of Inventory and Accounts Payable should be net of discount

Amount of Inventory = $120,000*98% = $117,600

The amount of Accounts Payable is also = $117,600

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