00:01
Merchandise with a list price of 4 ,700 is purchased on account, terms f -o -b shipping point.
00:08
1 .10 net 30 means that the customer will get a 1 % discount if they pay within 10 days or else the rest is due within 30.
00:18
The seller prepaid freight cost of 100.
00:22
Prior to payment, $1 ,600 of merchandise is returned.
00:27
The invoice is paid within the discount period.
00:32
What the journal entry be to purchase the merchandise? well, you would have a debit to inventory because you got more inventory on your books, and you would have credit to accounts payable, because we haven't actually paid this amount yet, we're going to owe it.
00:52
And remember, our liabilities increase with credits.
00:56
I'm going to start keeping a tab of what we owe because we're going to have some changes.
01:01
For example, we return some of these goods.
01:05
Returns effectively just reverses some of that we made in the entry before.
01:11
It says we returned a 1600 worth of merchandise.
01:16
So i would decrease my bill or liability by the 1600, and i would also decrease my inventory by 1600 to show that i no longer have this amount...