Assume ABC merchandize company purchase merchandize and 680000 on April 2016. A) Record the journal entry. B) Assume ABC purchase on account ( credit) and record the journal entry. C) Assume that the company purchase in terms of n/30 and record the journal entry. D) Assume the term invoices is 2/30,n/30 record the journal entry.
A) If ABC merchandize company purchases merchandise for $680,000 on April 2016 using cash, the journal entry would be:
Date: April 2016
Debit: Merchandise Inventory - $680,000
Credit: Cash - $680,000
B) If ABC purchases merchandise on account (credit), the journal entry would be:
Date: April 2016
Debit: Merchandise Inventory - $680,000
Credit: Accounts Payable - $680,000
C) If the company purchases merchandise with the terms "n/30" (meaning they have 30 days to make the payment), the journal entry would be recorded at the time of purchase, and it would be:
Date: April 2016
Debit: Merchandise Inventory - $680,000
Credit: Accounts Payable - $680,000
D) If the term of the invoice is "2/30, n/30" (meaning they can receive a 2% discount if paid within 30 days, otherwise, the full amount is due within 30 days), the journal entry would be recorded at the time of purchase, and it would be:
Date: April 2016
Debit: Merchandise Inventory - $680,000
Credit: Accounts Payable - $680,000
(Note: In this case, the discount would be recorded separately when the payment is made, rather than at the time of purchase.)
A) To record the journal entry for the purchase of merchandise on April 2016, you will need to determine which accounts are impacted by the transaction. In this case, the purchase will impact the Merchandise Inventory account and either the Cash or Accounts Payable account, depending on the payment terms.
The journal entry would be as follows:
Debit Merchandise Inventory: $680,000
Credit Cash or Accounts Payable: $680,000
B) If ABC purchased the merchandise on account, meaning they did not immediately pay for it, the journal entry will be slightly different. Instead of crediting Cash, you will credit the Accounts Payable account.
The journal entry would be as follows:
Debit Merchandise Inventory: $680,000
Credit Accounts Payable: $680,000
C) If the company purchased the merchandise with terms of n/30, it means they have 30 days to pay for the purchase. The journal entry would remain the same as the initial entry, but you would also need to record the accounts payable due within 30 days.
The journal entry would be as follows:
Debit Merchandise Inventory: $680,000
Credit Accounts Payable: $680,000
Credit Accounts Payable (due within 30 days): $680,000
D) If the term of the invoice is 2/30, n/30, it means a 2% discount is offered if payment is made within 30 days, otherwise, the full amount is due. In this case, the journal entry will include the discount for early payment.
The journal entry would be as follows:
Debit Merchandise Inventory: $680,000
Credit Accounts Payable: $680,000
Credit Purchases Discount (2% of $680,000): $13,600
Note: The Purchases Discount account represents the discount amount, and it is a contra account to the Accounts Payable. It reduces the Accounts Payable liability.
Always consult with an accounting professional or refer to your company's specific accounting policies to ensure accurate recording of transactions.