Financial Accounting: An Integrated Statements Approach, 2nd Edition

Cheddar Company purchased merchandise on account from a supplier for $8,500, terms 2/10,

n/30. Before payment was due, Cheddar Company returned $800 of the merchandise and re-

ceived full credit.

a. If Cheddar Company pays the invoice within the discount period, what is the amount of

cash required for the payment?

b. Under a perpetual inventory system, what account is credited by Cheddar Company to

record the return?

Determine the amount to be paid in full settlement of each of the following invoices, assuming

that credit for returns and allowances was received prior to payment and that all invoices were

paid within the discount period.

Transportation Returns and

Merchandise Paid by Seller Allowances

a. $12,000 — FOB destination, n/30 $1,500

b. 4,500 $200 FOB shipping point, 1/10, n/30 500

c. 5,000 — FOB destination, 2/10, n/30 —

d. 5,000 — FOB shipping point, 1/10, n/30 1,000

e. 1,500 50 FOB shipping point, 2/10, n/30 700

A retailer is considering the purchase of 100 units of a specific item from either of two suppli-

ers. Their offers are as follows:

A: $400 a unit, total of $40,000, 2/10, n/30, plus transportation costs of $625.

B: $403 a unit, total of $40,300, 1/10, n/30, no charge for transportation.

Which of the two offers, A or B, yields the lower price?

The debits and credits from four related transactions are presented in the following T accounts.

Describe each transaction.

246 Chapter 5 Accounting for Merchandise Operations

CASH

(2) 175

(4) 6,860

ACCOUNTS PAYABLE

(3) 1,000 (1) 8,000

(4) 7,000

MERCHANDISE INVENTORY

(1) 8,000 (3) 1,000

(2) 175 (4) 140

Enid Co., a women’s clothing store, purchased $7,500 of merchandise from a supplier on account,

terms FOB destination, 2/10, n/30. Enid Co. returned $1,200 of the merchandise, receiving a

credit memorandum, and then paid the amount due within the discount period. Journalize Enid

Co.’s entries to record (a) the purchase, (b) the merchandise return, and (c) the payment.

Journalize entries for the following related transactions of Regius Company:

a. Purchased $12,000 of merchandise from Loew Co. on account, terms 2/10, n/30.

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

c. Discovered that $3,000 of the merchandise was defective and returned items, receiving

credit.

Exercise 5-20

Purchase-related transaction

Goal 4

Exercise 5-21

Determining amounts to be

paid on invoices

Goal 4

a. $10,500

Exercise 5-22

Purchase-related transactions

Goal 4

Exercise 5-23

Purchase-related transactions

Goal 4

Exercise 5-24

Purchase-related transactions

Goal 4

Exercise 5-25

Purchase-related transactions

Goal 4