Question

1. On April 5, purchased merchandise on account from Sheffield Company for $44,600, terms 2/10, net/30, FOB shipping point.
2. On April 6, paid freight costs of $890 on merchandise purchased from Sheffield.
3. On April 7, purchased equipment on account for $44,400.
4. On April 8, returned damaged merchandise to Sheffield Company and was granted a $5,700 credit for returned merchandise.
5. On April 15, paid the amount due to Sheffield Company in full.

Required:
Prepare the journal entries to record these transactions on the books of Kerber Co. under a perpetual inventory system.

Answer 1

Answer:

The Journal entries are as follows:

(1) On April 5,

Merchandise Inventory A/c Dr. $44,600

           To Accounts Payable                   $44,600

(To record the merchandise purchase on account)

(2) On April 6,

Merchandise Inventory A/c Dr. $890

         To cash A/c                                $890

(To record the payment of freight)

(3) On April 7,

Equipment A/c Dr. $44,400

    To accounts payable       $44,400

(To record the purchasing of equipment)

(4) On April 8,

Accounts Payable A/c Dr. $5,700

          To Merchandise Inventory    $5,700

(To record the damaged merchandise)

(5) On April 15,

Accounts Payable A/c Dr. $38,900

        To Merchandise Inventory       $778

        To cash                                      $38,122

(To record the payment of due amount)

Workings:

Accounts Payable = $44,600 - $5,700

                              = $38,900

Merchandise Inventory = 2% of $38,900

                                       = $778