Larkspur Corporation uses a periodic inventory system and the gross method of ac
ID: 2531375 • Letter: L
Question
Larkspur Corporation uses a periodic inventory system and the gross method of accounting for purchase discounts.
Prepare all necessary journal entries for Larkspur. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Date
Account Titles and Explanation
Debit
Credit
(a) On July 1, (1) Larkspur purchased $79,000 of inventory, terms 1/10, n/30, FOB shipping point. (2) Larkspur paid freight costs of $1,104. (b) On July 3, Larkspur returned damaged goods and received credit of $7,900. (c) On July 10, Larkspur paid for the goods.Explanation / Answer
Larkspur Corporation
Journal Entries:
No.
Date
Account Titles and Explanation
Debit
Credit
a. 1
1-Jul
Purchases
$79,000
Accounts Payable
$79,000
(To record purchase of inventory on account)
Freight-in
$1,104
Cash
$1,104
(To record freight paid for inventory)
b. 2
3-Jul
Accounts Payable
$7,900
Purchase Returns and Allowances
$7,900
(To record damaged goods returned)
c.3
10-Jul
Accounts Payable
$71,100
Cash
$70,389
Purchase Discount
$711
Computations:
Purchase discount –
Accounts payable = 79,000
Less: goods returned = 7,900
Balance in accounts payable = $71,100
Discount for payment within 10 days = 1%
Discount = $71,100 x 1% = $711
Balance amount paid = 70,100 – 711 = $70,389
No.
Date
Account Titles and Explanation
Debit
Credit
a. 1
1-Jul
Purchases
$79,000
Accounts Payable
$79,000
(To record purchase of inventory on account)
Freight-in
$1,104
Cash
$1,104
(To record freight paid for inventory)
b. 2
3-Jul
Accounts Payable
$7,900
Purchase Returns and Allowances
$7,900
(To record damaged goods returned)
c.3
10-Jul
Accounts Payable
$71,100
Cash
$70,389
Purchase Discount
$711
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