EX 6-7 Purchase-related transactions

Warwick’s Co., a women’s clothing store, purchased $75,000 of merchandise from a supplier on account, terms FOB destination, 2/10, n/30. Warwick’s returned $9,000 of the merchandise, 

receiving a credit memo, and then paid the amount due within the discount period. Journalize Warwick’s entries to record (a) the purchase, (b) the merchandise return, and (c) the payment.

Answer:

a. Merchandise Inventory [$75,000 – ($75,000 × 2%)] 73,500

Accounts Payable 73,500

b. Accounts Payable [$9,000 – ($9,000 × 2%)] 8,820

Merchandise Inventory 8,820

c. Accounts Payable 64,680

Cash 64,680