COLLEGE ACCOUNTING (LL)W/ACCESS>CUSTOM<
COLLEGE ACCOUNTING (LL)W/ACCESS>CUSTOM<
4th Edition
ISBN: 9781260255157
Author: Haddock
Publisher: MCG CUSTOM
bartleby

Videos

Textbook Question
Book Icon
Chapter 8, Problem 4PA

NewTech Medical Devices is a medical devices wholesaler that commenced business on June 1, 2019. NewTech Medical Devices purchases merchandise for cash and on open account. In June 2019, NewTech Medical Devices engaged in the following purchasing and cash payment activities:

Chapter 8, Problem 4PA, NewTech Medical Devices is a medical devices wholesaler that commenced business on June 1, 2019.

INSTRUCTIONS

Journalize the transactions in a general journal. Use 1 as the journal page number.

Analyze: What was the amount of trade discounts received on the June 15 purchase from Park Research?

Expert Solution & Answer
Check Mark
To determine

Record the transaction into general journal.

Explanation of Solution

Journalizing:

Journalizing refers to that process in which the transactions of an organization are recorded in a sequence. Based on the recorded entries, the accounts are posted to the relevant ledger accounts.

The general journal recording the transactions is as follows:

Recording the purchases on cash:

GENERAL JOURNALPage 1
DateAccount Title and ExplanationPost Ref.

Debit

($)

Credit

($)

June 1, 2019Purchases 4,500 
       Cash  4,500
 (to record the inventory purchased on cash)   

Table (1)

  • • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
  • • The cash account is an asset account and account balance for cash is decreasing. Therefore, it is credited.

Recording the purchases on credit:

GENERAL JOURNALPage 1
DateAccount Title and ExplanationPost Ref.

Debit

($)

Credit

($)

June 3, 2019Purchases 1,700 
       Accounts payable/Company BC  1,700
 (to record the inventory purchased on account with terms2/10, n/30)   

Table (2)

  • • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
  • • Since, the accounts payable is liability and account balance is increasing. Therefore, it is credited.

Recording the purchases on credit including freight charges:

GENERAL JOURNALPage 1
DateAccount Title and ExplanationPost Ref.

Debit

($)

Credit

($)

June 5, 2019Purchases 5,850 
 Freight In 110 
       Accounts payable/Company NC  5,960
 (to record the inventory purchased on account with terms2/10, n/30)   

Table (3)

  • • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
  • • The freight-in account is debited. This is because the freight-in account is an expense account and it has normal debit balance which is increasing.
  • • Accounts payable is liability and balance for accounts payable is increasing. Therefore, it is credited.

Recording the payment made:

GENERAL JOURNALPage 1
DateAccount Title and ExplanationPost Ref.

Debit

($)

Credit

($)

June 9, 2019Accounts payable/Company BC 1,700 
       Purchases discounts  34
       Cash  1,666
 (to record the payment made and receiving purchases discount)   

Table (4)

  • • The accounts payable is liability and the account balance is decreasing. Therefore, accounts payable account is debited.
  • • The purchases discount account is a contra expense account. The account has the normal credit balance and its increasing. Therefore, it is credited.
  • • The cash account is an asset account and the account balance is decreasing. Therefore, it is credited.

Recording the purchases returned and credit memorandum received:

GENERAL JOURNALPage 1
DateAccount Title and ExplanationPost Ref.

Debit

($)

Credit

($)

June 10, 2019Accounts payable/Company NC 150 
       Purchases returns and allowances  150
 (to record the inventory returned and credit memorandum received)   

Table (5)

  • • The accounts payable account is a liability account. The accounts payable account has the normal credit balance and it is decreasing. Therefore, it is debited.
  • • The purchase returns and allowances account is contra expenses account. The account has the normal credit balance and increasing. Therefore, it is credited.

Recording the purchases on credit:

GENERAL JOURNALPage 1
DateAccount Title and ExplanationPost Ref.

Debit

($)

Credit

($)

June 11, 2019Purchases 1,680 
       Accounts payable/Company BC  1,680
 (to record the inventory purchased on account with terms2/10, n/30)   

Table (6)

  • • The purchases account is debited. This is because the purchase account is an expense account and has normal debit balance which is increasing.
  • • Since, the accounts payable is liability and account balance is increasing. Therefore, it is credited.

Recording the payment made:

GENERAL JOURNALPage 1
DateAccount Title and ExplanationPost Ref.

Debit

($)

Credit

($)

June 14, 2019Accounts payable/Company NC 5,810 
       Purchases discounts  114
       Cash  5,696
 (to record the payment made and receiving purchases discount)   

Table (7)

  • • The accounts payable is liability and the account balance is decreasing. Therefore, accounts payable account is debited.
  • • The purchases discount account is a contra expense account. The account has the normal credit balance and its increasing. Therefore, it is credited.
  • • The cash account is an asset account and the account balance is decreasing. Therefore, it is credited.

Recording the purchases on credit:

GENERAL JOURNALPage 1
DateAccount Title and ExplanationPost Ref.

Debit

($)

Credit

($)

June 15, 2019Purchases 6,256 
       Accounts payable/Company PR  6,256
 (to record the inventory purchased on account with terms n/30)   

Table (8)

  • • The purchases account is debited. This is because the purchase account is an expense account and has normal debit balance which is increasing.
  • • Since, the accounts payable is liability and account balance is increasing. Therefore, it is credited.

Recording the purchases on cash:

GENERAL JOURNALPage 1
DateAccount Title and ExplanationPost Ref.

Debit

($)

Credit

($)

June 20, 2019Purchases 3,000 
       Cash  3,000
 (to record the inventory purchased on cash)   

Table (9)

  • • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
  • • The cash account is credited. This is because the cash account is an asset account and account balance is decreasing.

Recording the purchases returned:

GENERAL JOURNALPage 1
DateAccount Title and ExplanationPost Ref.

Debit

($)

Credit

($)

June 25, 2019Cash 280 
       Purchases returns and allowances  280
 (to record the inventory returned and cash received)   

Table (10)

  • • The cash account is debited. This is because the cash account is asset account and the account balance is increasing.
  • • The purchase returns and allowances account is contra expenses account. The account has the normal credit balance and increasing. Therefore, it is credited.

Recording the purchases on credit including freight charges:

GENERAL JOURNALPage 1
DateAccount Title and ExplanationPost Ref.

Debit

($)

Credit

($)

June 30, 2019Purchases 3,200 
 Freight In 85 
       Accounts payable/Company NC  3,285
 (to record the inventory purchased on account with terms2/10, n/30)   

Table (11)

  • • The purchases account is an expense account. The purchases account has normal debit balance and the balance is increasing. Therefore, it is debited.
  • • The freight In account is debited. This is because the freight In account is an expense account and it has normal debit balance which is increasing.
  • • Since, the accounts payable is liability and account balance is increasing. Therefore, it is credited.

Calculation of total trade discount:

The formula to calculate the first trade discount is given below,

First trade discount=List price×Percentage100

Substitute $9,200 for list price and 20 for percentage in the above formula.

First trade discount=$9,200×20100=$1,840

The formula to calculate the second trade discount is given below,

Second trade discount=(List priceFirst trade discount)×(Percentage100)

Substitute $9,200 for list price, $1,840 for first trade discount and 15 for percentage in the above formula.

Second trade discount=($9,200$1,840)×15100=$1,104

The formula to calculate the total trade discount is given below,

Total trade discount = First trade discountSecond trade discount

Substitute $1,840 for first trade discount and $1,104 for second trade discount in the above formula.

Total trade discount =$1,840+$1,104=$2,944

The total trade discount should be of $2,944 amount.

Working Note:

Calculation of purchases discount:

The purchases discounts are received by the buyer from the seller. The purchases discounts are received by the buyer for fulfilling the terms of timely payment to seller for purchases. The terms related to paying on timely basis with the company BC were agreed as 2/10, n/30. The terms 2/10, n/30 means the buyer is entitled to receive two percent of purchase discount on the purchases amount. The buyer will be entitled to the discount only if the payment is paid within ten days after provided invoice.

Amount of purchases discount=[(Purchases amountPurchases reutrnsFreight charges)×(Percentage of purchases discount100)]=$1,700×2100=$34

The amount calculated as purchase discount would be $34.

Calculation of purchases discount:

The purchases discounts are received by the buyer from the seller. The purchases discounts are received by the buyer for fulfilling the terms of timely payment to seller for purchases. The terms related to paying on timely basis with the company BC were agreed as 2/10, n/30. The terms 2/10, n/30 means the buyer is entitled to receive two percent of purchase discount on the purchases amount. The buyer will be entitled to the discount only if the payment is paid within ten days after provided invoice.

Amount of purchases discount=[(Purchases amountPurchases reutrnsFreight charges)×(Percentage of purchases discount100)]=($5,850$150)×2100=$114

The amount calculated as purchase discount would be $114.

Calculations for the purchases amount:

The seller provides the trade discount of twenty percent and the fifteen percent on the list price to the buyer. The purchases amount to be recorded by the buyer would be at the invoice price.

First trade discount=List price×Percentage100=$9,200×20100=$1,840

Second trade discount=(List priceFirst trade discount)×(Percentage100)=($9,200$1,840)×15100=$1,104

Total trade discount = First trade discountSecond trade discount=$1,840+$1,104=$2,944

Invoice price=List priceTrade discount=$9,200$2,944=$6,256

The purchases amount that would be calculated is $6,256.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
StickUps Company uses a Sales Journal, a Purchases Journal, a Cash Receipts Journal, a Cash Disbursements Journal, and a General Journal. The following transactions occurred during the month of September 2020: Sept.   3 Purchased merchandise on credit for $6,200 from Pacer Co.     7 Sold merchandise on credit to J. Namal for $1,800, subject to a 2% sales discount if paid by the end of the month. Cost, $1,000.     9 Borrowed $5,500 by giving a note to the bank.     13 The owner, Dale Trent, invested an additional $7,000 cash into the business.     18 Sold merchandise to B. Baird for $460 cash. Cost, $280.     22 Paid Pacer Co. $6,200 for the merchandise purchased on September 3.     27 Received $1,764 from J. Namal in payment of the September 7 purchase.     30 Paid salaries of $3,200. Journalize the September transactions that should be recorded in the Cash Receipts Journal, assuming the perpetual inventory system. (Enter transactions in order)  Image attached…
Lloyd Gurango Co. completed the following sales transactions during the month of June 2019. All credit sales have terms of 3/10, n/30 and all invoices are dates as at the transaction date. June 1 Sold merchandise on account to KRA Company, P32 000. Invoice number 377 Sold merchandise on account to LRM Trading, P54 000. Invoice number 378. Sold P46 000 of merchandise for cash. Received payment from KRA Company, less discounts. Received payment from LRM Trading, less discounts. Sold merchandise to JPT Store on account, P62 000. Invoice number 379. 6. Borrowed P30 000 from the Unlad Bank issuing a 10% note payable due in 3 JPT Store returned P11 000 of merchandise from the June 13 sale. Sold merchandise to NOV Convenience Store on account, P17 000. Invoice months number 380. Collected amount due from JPT Store less returns and discounts. 16 Received P6 000 from NOV Convenience Store. Sold goods on account to LPR Co, P34 000. Invoice number 381 347935
Star Company uses a purchases journal to record all purchases on account, including merchandise purchases. The company purchases merchandise and office supplies on a frequent basis. On November 12, Star Company purchased merchandise on account from Moon Company for $6,500, terms 2/10, n/30. How would this transaction be recorded in the purchases journal of Star Company?

Chapter 8 Solutions

COLLEGE ACCOUNTING (LL)W/ACCESS>CUSTOM<

Ch. 8 - Prob. 2.5SRECh. 8 - Prob. 2.6SRACh. 8 - What is the name of the account used to record...Ch. 8 - What type of account is Purchases Returns and...Ch. 8 - Prob. 3CSRCh. 8 - Prob. 4CSRCh. 8 - Prob. 5CSRCh. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - Prob. 4DQCh. 8 - Prob. 5DQCh. 8 - Prob. 6DQCh. 8 - What type of accounts are kept in the accounts...Ch. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQCh. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Prob. 13DQCh. 8 - Why is using the Purchases Returns and Allowances...Ch. 8 - Prob. 15DQCh. 8 - Prob. 16DQCh. 8 - Prob. 17DQCh. 8 - Prob. 18DQCh. 8 - Identify the normal balance of the following...Ch. 8 - Prob. 2ECh. 8 - Prob. 3ECh. 8 - Record the following transactions of J. Min...Ch. 8 - Record the following transactions of Allen Inc.:Ch. 8 - Bushard Company (buyer) and Schmidt, Inc. (seller)...Ch. 8 - Prob. 7ECh. 8 - Prob. 8ECh. 8 - Prob. 9ECh. 8 - Prob. 10ECh. 8 - Prob. 11ECh. 8 - Prob. 12ECh. 8 - Prob. 13ECh. 8 - Record the following transactions of Fashion Park...Ch. 8 - On April 1, Moloney Meat Distributors sold...Ch. 8 - Bushard Company (buyer) and Schmidt, Inc. (seller)...Ch. 8 - Annettes Photo Shop is a retail store that sells...Ch. 8 - Prob. 2PACh. 8 - Prob. 3PACh. 8 - NewTech Medical Devices is a medical devices...Ch. 8 - Prob. 5PACh. 8 - Bowden Company (buyer) and Song, Inc. (seller),...Ch. 8 - The following transactions took place at Fine...Ch. 8 - Prob. 1PBCh. 8 - Taras Card and Novelty Shop is a retail card,...Ch. 8 - Prob. 3PBCh. 8 - Prob. 4PBCh. 8 - Prob. 5PBCh. 8 - Belladonna Company (buyer) and Sachi, Inc....Ch. 8 - The following transactions took place at The...Ch. 8 - William Evans began Evans Distributors, a sporting...Ch. 8 - Prob. 2CTPCh. 8 - Prob. 1MFCh. 8 - Prob. 2MFCh. 8 - Prob. 3MFCh. 8 - Prob. 4MFCh. 8 - Prob. 5MFCh. 8 - Prob. 6MFCh. 8 - Prob. 1ED
Knowledge Booster
Background pattern image
Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
Text book image
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Text book image
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Text book image
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
IAS 29 Financial Reporting in Hyperinflationary Economies: Summary 2021; Author: Silvia of CPDbox;https://www.youtube.com/watch?v=55luVuTYLY8;License: Standard Youtube License