I am really confused on how the terms of transportation and merchandise should be journaled. Also, the discounts and stuff.
Purchased $5,000 of merchandise from Phillips Co. on account, terms 2/10, n/30
Dr. Merchandise 5,000
Cr. Accounts Payable – Phillips Co. 5,000
Paid Phillips Co. on account for purchases, less discount.
Dr. Accounts Payable – Phillips Co. 5,000
Cr. Cash 4,900 (5,000*.98)
Cr. Purchases Discounts Received 100 (5,000*.02)
Purchased $3,500 of merchandise from Farris Co. on account, terms FOB shipping point, n/30, with prepaid shipping costs of $80 added to the invoice.
Dr. Merchandise 3,420
Dr. Freight-in 80
Cr. Accounts Payable – Farris Co. 3,500
Returned merchandise from Farris Co. $900
Dr. Accounts Payable – Farris Co. 900
Cr. Merchandise 900
Paid Farris Co. on account for purchases, less return.
Total AP owed to Farris: 3,500-900 = 2,600
Dr. Accounts Payable – Farris Co. 2,600
Cr. Cash 2,600
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