Merchandising accounting exercises with answers pdf

Exercise 5-1

Question This information relates to Lewis Co.

1. On April 5, purchased merchandise from McCarthy Company for $16,000, terms 2/10, n/30.

2. On April 6, paid freight costs of $700 on merchandise purchased from McCarthy. 3. On April 7, purchased equipment on account for $35,000. 4. On April 8, returned some of April 5 merchandise to McCarthy Company, which

cost $3,600. 5. On April 15, paid the amount due to McCarthy Company in full.

Instructions

(a) Prepare the journal entries to record the transactions listed above on the books of Lewis Co. Lewis Co. uses a perpetual inventory system.

(b) Assume that Lewis Co. paid the balance due to McCarthy Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

Solution

(a) (1) April 5 Inventory ............................................................ 16,000

Accounts Payable .................................... 16,000

(2) April 6 Inventory ............................................................ 700

Cash ........................................................ 700

(3) April 7 Equipment ......................................................... 35,000

Accounts Payable .................................... 35,000

(4) April 8 Accounts Payable .............................................. 3,600

Inventory .................................................. 3,600

(5) April 15 Accounts Payable

($16,000 – $3,600) ......................................... 12,400

Cash ($12,400 – $248) ............................ 12,152

Inventory

[($16,000 – $3,600) X 2%] .................... 248

(b) May 4 Accounts Payable ($16,000 – $3,600) ......................... 12,400

Cash ................................................................... 12,400