April.4 purhcase merchandise from RediX, Inc.,$1900;term 2/10, n/60,FOB shipping point, frieght of $85 added to the invoice.
April 10 returned $850 of merchandise to Redix.Inc.
perpetual invetory:
April 4
(Debit) Inventory $1985
(Credit) Accounts Payable $1985
April 10
(Debit) Accounts Payable $250
(Credit) Inventory $250
What i dnt understand is...how they got the $250....HELP PLZ...thnz!
Are you certain it is not a typo? $850?
this is a practice and i typed exactly how its written on the question and answer...:-S...
hi...sry...i just got a msg from my professor...he made a mistake and that $250 is $850...thnx... :-)
To understand how the $250 was obtained, let's break down the transaction step by step:
On April 4th, a purchase of merchandise was made from RediX, Inc. for $1900, with terms 2/10, n/60. This means that if payment is made within 10 days, a 2% discount can be earned, otherwise the full amount is due within 60 days. Additionally, the FOB (Free On Board) shipping point indicates that the buyer is responsible for the freight costs.
Since the FOB shipping point is indicated, the buyer (you) is responsible for the freight costs. In this case, $85 was added to the invoice for freight. So the total invoice amount becomes $1900 + $85 = $1985.
Therefore, on April 4th, the entry to record this purchase and increase in inventory should be:
(Debit) Inventory: $1985
(Credit) Accounts Payable: $1985
Now, on April 10th, a portion of the merchandise was returned to Redix, Inc. worth $850. To account for this return and reduce the inventory, the entry should be:
(Debit) Accounts Payable: $250
(Credit) Inventory: $250
The $250 in the credit for inventory implies that only $250 worth of the returned merchandise was included in the previous inventory entry. The remaining $600 ($850 - $250) is still considered a liability and will be deducted from the accounts payable.
It's important to note that without additional information, the $250 credit may not represent the exact value of the returned merchandise. It could be a negotiated amount or based on a specific agreement. It's always advisable to consult the purchase agreement or seek clarification from Redix, Inc. to be certain of the specifics.