On August 1, 2010, Wellington Appliances purchased 75 refrigerators for $55,000
ID: 2552208 • Letter: O
Question
On August 1, 2010, Wellington Appliances purchased 75 refrigerators for $55,000 cash and also paid $1,500 transportation costs relat $50,000 on credit; however, the seller ed to this purchase. On the same date, Wellington purchased 100 dishwashers for paid the $1,200 freight. The credit terms for the dishwashers were 2/10, On August 3rd, Wellington determined that 5 of the refrigerators were defective, so they were returned to paid for the the seller. Wellington paid for the dishwashers on August 9th. On August 10th, Wellington purchased 90 microwave ovens for $9,000 on credit with terms 1/10, n/30. The seller paid the freight. Wellington microwave ovens on August 21st. Wellington uses a perpetual inventory system. Prepare any Necessary Journal Entries for the purchases by Wellington: Refer to the information presented for Wellington Appliances. On August 12th, Wellington sold 15 dishwashers to customers for $800 each. Wellington paid $200 for these dishwashers when it purchased them from the supplier on August 1st. On August 15th customers returned two dishwashers. Prepare all of Wellington's journal entries to record the sale and returns.Explanation / Answer
Date
Particulars
DEBIT ($)
CREDIT ($)
August 1, 2010
Purchases A/C (Refrigerator) Dr.
Freight Inwards A/C Dr.
To Cash A/C
55,000
1,500
56,500
Purchases A/C (Dishwasher) Dr.
Freight Inwards A/C Dr.
To Trade payables A/C
50,000
1,200
51,200
August 3, 2010
Trade receivables A/C (For purchases return) Dr.
To Purchases return A/C (Refrigerator)
[(55000/75) x 5]
3,667
3,667
August 9, 2010
Trade payables A/C (Dishwasher) Dr.
To Cash A/C
To Discount received A/C
51,200
50,200
1,000
August 10, 2010
Purchases A/C (Microwave Ovens) Dr.
To Trade payables A/C
9,000
9,000
August 12, 2010
Trade receivables A/C Dr.
To sales A/C (Dishwasher)
[800 x 15]
12,000
12,000
August 15, 2010
Sales return A/C (Dishwasher) Dr.
To Trade receivables A/C
1,600
1,600
August 21, 2010
Trade payables A/C (Microwave Ovens) Dr.
To Cash A/C
9,000
9,000
Note: (1.) It is assumed that the transportation costs paid by the supplier for dishwasher are to be borne by Wellington.
(2.) It is assumed that seller of Dishwasher and seller of refrigerator are not same.
(3.) Credit terms for dishwasher were 2/10,n/30. It means if paid within 10 days, cash discount of 2% will be provided. Otherwise, payment will be due in 30 days. Wellington paid within 10 days, so cash discount of 2% will be provided on the amount of purchases, i.e., $50,000. Cash Discount = 50,000 x 2% = $1,000. Payment to be made to Supplier = Cost of Dishwasher – Cash Discount + Transportation costs = 50,000 -1,000 + 1,200 = $50,200.
(4.) It is assumed that transportation costs for microwave ovens are to borne by the seller as the freight amount is not available. So no entry will be made for the same.
(5.) Credit terms for microwave ovens were 1/10,n/30. It means if paid within 10 days, cash discount of 1% will be provided. Otherwise, payment will be due in 30 days. Wellington made the payment after 10 days on August 21st, so no discount will be made available.
Date
Particulars
DEBIT ($)
CREDIT ($)
August 1, 2010
Purchases A/C (Refrigerator) Dr.
Freight Inwards A/C Dr.
To Cash A/C
55,000
1,500
56,500
Purchases A/C (Dishwasher) Dr.
Freight Inwards A/C Dr.
To Trade payables A/C
50,000
1,200
51,200
August 3, 2010
Trade receivables A/C (For purchases return) Dr.
To Purchases return A/C (Refrigerator)
[(55000/75) x 5]
3,667
3,667
August 9, 2010
Trade payables A/C (Dishwasher) Dr.
To Cash A/C
To Discount received A/C
51,200
50,200
1,000
August 10, 2010
Purchases A/C (Microwave Ovens) Dr.
To Trade payables A/C
9,000
9,000
August 12, 2010
Trade receivables A/C Dr.
To sales A/C (Dishwasher)
[800 x 15]
12,000
12,000
August 15, 2010
Sales return A/C (Dishwasher) Dr.
To Trade receivables A/C
1,600
1,600
August 21, 2010
Trade payables A/C (Microwave Ovens) Dr.
To Cash A/C
9,000
9,000
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