Answer to Question #225839 in Accounting for Shahidul Islam

Question

ITC Co. Ltd. completed the following merchandising transactions in the month of May. At the beginning of May, the ledger of Robinson showed Cash balance of $6,000.

a) Journalize the following transactions of May (Assume that the company follows Perpetual Inventor System), by

- - - selecting the accounts to be debited and stating the debit amounts,

- - - selecting the accounts to be credited and stating the credit amounts.

May 7 Received credit from Logun Ltd. for merchandise returned $300.

Account to be debited is

The debit amount is $

Account to be credited is

The credit amount is $

May 10 Paid Logun Ltd. for purchase in May 1.

Account to be debited is

The debit amount is $

Account to be credited (lesser of the two credit accounts) is

The credit amount is $

The other account to be credited is

The credit amount is $ 

Answer 1

Solution:

a.). The journal entries are as follows:

May 7^th received credit from Logun Ltd for merchandise returned $300:

Dr. Accounts payable A/c                                  300

              Cr. Merchandise inventory                                                 300

(To recognize the return of the merchandise to Logun Ltd)

Account to be debited is = Accounts payable A/c (Logun Ltd)

The debit amount is = $300

Account to be credited is = Merchandise inventory A/c

The credit amount is = $300

 

May 10^th paid Logun Ltd for purchase in May 1^st:

May 1^st purchase = $4,600

Less merchandise returned = $300

Amount payable = $4,300

Purchase terms were 2/10, n/30, which means that ITC Co. Ltd is eligible to get a 2% discount on trade credit if the amount is paid within 10 days. The amount was paid within 10 days, so the discount is issued.

Purchase discount = 2$\%$ $\times$ 4,300 = 86

Journal entries:

Dr. Accounts payable A/c                          4,300

            Cr. Merchandise inventory A/c                                    86

            Cr. Cash A/c                                                             4,214

(To recognize payment to Logun Ltd less purchase discount of 2%)

Account to be debited is = Accounts payable A/c (Logun Ltd)

The debit amount is = $4,300

Account to be credited (lesser of the two credit accounts) is = Merchandise inventory A/c

The credit amount is = $86

The other account to be credited is = Cash A/c

The credit amount is = $4,214