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ze the following tranactions, Write \"NO ENTRY\" if appropriate. n12 0s we purch

ID: 2556222 • Letter: Z

Question

ze the following tranactions, Write "NO ENTRY" if appropriate. n12 0s we purchase merchandise inventory and owe $27,0o0. The terms of this credit purchase are 1/20, n/40. General Journal 12/20/0s 2) On 12/23/05 we return $7,000 of the above purchase. General Journal 12/23/05 3) On 1/11/06 we pay the balance owed on the above purchase. General Journal 1/11/06 4) On 1/22/06 a $350 freight bill is paid by the responsible party for the shipping of the above merchandise inventory. The shipment was FOB Destination. General Journal 1/22/06 5) On 2/2/06 sold all of the above available inventory for $50,000 on account. General Journal 2/2/06

Explanation / Answer

1. 12/20/05

Merchandise Inventory Purchase account debit 27,000

Account Payable account credit 27,000

(Being inventory purchase on credit terms of 1/20,n/40)

2. 12/23/05

Accounts Payable account debit 7,000

Merchandise Inventory account credit 7,000

(Being inventory returned to the supplier)

3. 1/11/06

Accounts Payable account debit 20,000

Cash account credit 20,000

(Being Balance paid against merchandise Inventory Purchase)

Discount will not be applicable on above payment. Payment term 1/20 means 1% discount will be available if payment recdrece within 20 days, in current case payment received after 20 days hence no discount)

4. 1/22/06

No Entry Require

Under FOB Destination (Free on board Destination) buyer will take delivery of goods shipped by seller. Freight charges will bear by seller hence no entry require in buyers account as freight cost is included in its purchase cost

5.2/2/06

Account Receivable Account Debit 50,000

Merchandise Inventory sale account credit 20,000

Profit and loss account credit 30,000

(Being inventory sold at profit on account)