Question

Littleton Books has the following transactions during May. May 2 Purchases books on account from Readers Wholesale for $4,200, terms 2/10, n/30. May 3 Pays cash for freight costs of $290 on books purchased from Readers. May 5 Returns books with a cost of $350 to Readers because part of the order is incorrect. May 10 Pays the full amount due to Readers. May 30 Sells all books purchased on May 2 (less those returned on May 5) for $4,900 on account. Required: 1. Record the transactions of Littleton Books, assuming the company uses a periodic inventory system.

Answer 1

Answer:

Explanation:

The journal entries are shown below:

On May 2:

Purchase A/c Dr $4,200

     To Accounts Payable A/c $4,200

(Being purchase is made on credit)

On May 3:

Freight Inward A.c Dr $290

    To Cash A/c                     $290

(Being freight expenses are paid in cash)

On May 5:

Accounts payable A/c  Dr $350

      To Purchase return               $350

(Being purchase return is recorded)

On May 10:

Accounts payable A/c  Dr $3,850

                      To Cash A/c             $3,773

                      To Discount             $77

(Being full amount is paid and the remaining balance is credited to the cash account)

The discount is computed below:

= (Purchase - purchase return) × discount rate

= ($4,200 - $350) × 2%

= $3,850 × 2%

= $77

On May 30:

Accounts receivable A/c Dr  $4,900

     To  Sales revenue                       $4,900

(Being sales is recorded)