Purchase-Related Transactions Journalize entries for the following related trans

Question

Purchase-Related Transactions

Journalize entries for the following related transactions of Lilly Heating & Air Company:

Purchased $38,000 of merchandise from Schell Co. on account, terms 1/10, n/30.

Paid the amount owed on the invoice within the discount period.

Discovered that $7,600 before purchases discount of the merchandise was defective and returned items, receiving credit.

Purchased $5,800 of merchandise from Schell Co. on account, terms n/30.

Received a check for the balance owed from the return in (c), after deducting for the purchase in (d).

Explanation / Answer

Solution: Following is the required journal entries:

Particulars Debit($) Credit ($) Merchandise Inventory 37,620 Accounts payable- Schell Co. 37,620 Accounts payable- Schell Co. 37,620 Cash 37,620 Accounts payable- Schell Co. 7,524 Merchandise Inventory 7,524 Merchandise Inventory 5,800 Accounts payable- Schell Co. 5,800 Cash 1,724 Accounts payable- Schell Co. 1,724

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