Information related to Duffy Co.Ltd is presented below
1.on April 5,purchased merchandise from Thomas Campany for 25000 birr,terms 2/10,net/30,FOB shipping point.
2.on April 6,paid freight cost of 900 birr on merchandise purchased from Thomas
3.on April 7,purchased equipment on account for 26000 birr
4.on April 8,returned damaged merchandise to Thomas and granted of 2600 birr credit for returned merchandise
5.on April 15,paid the amount due to Thomas in full
INSTRUCTIONS
a) prepare the journal entries to record these transactions on the book of Duffy Co.Ltd under perpetual inventory system
b) assume the Duffy Co.Ltd paid the balance due to Thomas campany Ltd on May 4 instead of April 15. Prepare the journal entry to record this payment
a) Under the perpetual inventory system, the journal entries for these transactions would be:
April 5:
Debit: Merchandise Inventory (25,000 birr)
Credit: Accounts Payable - Thomas Company (25,000 birr)
April 6:
Debit: Freight-In (900 birr)
Credit: Cash (900 birr)
April 7:
Debit: Equipment (26,000 birr)
Credit: Accounts Payable (26,000 birr)
April 8:
Debit: Accounts Payable - Thomas Company (2,600)
Credit: Merchandise Inventory (2,600 birr)
April 15:
Debit: Accounts Payable - Thomas Company (22,300 birr) [25,000 birr - 2,600 birr discount]
Credit: Cash (22,300 birr)
b) If Duffy Co.Ltd paid the balance due to Thomas Company Ltd on May 4 instead of April 15, the journal entries would be:
May 4:
Debit: Accounts Payable - Thomas Company (22,400 birr) [25,000 birr - 2,600 birr, no discount because the payment is made after the discount period (10 days)]
Credit: Cash (22,400 birr)
a) The journal entries to record these transactions on the books of Duffy Co.Ltd under the perpetual inventory system are as follows:
1. April 5:
Merchandise Inventory 25,000
Accounts Payable 25,000
(To record the purchase of merchandise from Thomas Company)
2. April 6:
Freight Expense 900
Cash 900
(To record the payment of freight cost on merchandise purchased from Thomas)
3. April 7:
Equipment 26,000
Accounts Payable 26,000
(To record the purchase of equipment on account)
4. April 8:
Accounts Payable 2,600
Merchandise Inventory 2,600
(To record the return of damaged merchandise to Thomas and credit granted)
5. April 15:
Accounts Payable 24,500
Merchandise Inventory 500
Cash 25,000
(To record the payment in full to Thomas Company)
b) The journal entry to record the payment of the balance due to Thomas Company Ltd on May 4 instead of April 15 is as follows:
May 4:
Accounts Payable 24,500
Cash 24,500
(To record the payment of the balance due to Thomas Company Ltd)