Texts: Purchase-Related Transactions
Journalize entries for the following related transactions of Lilly Heating & Air Company: (If an amount box does not require an entry, leave it blank.)
a. Purchased $37,000 of merchandise from Schell Co. on account, terms 1/10, n/30.
Account Debit Credit
Inventory $37,000
Accounts Payable-Schell Co. $37,000
b. Paid the amount owed on the invoice within the discount period.
Account Debit Credit
Accounts Payable-Schell Co. $36,630
Cash $36,630
b. A payment of the invoice within the discount period reduces Accounts Payable and Cash for the amount of the invoice less the discount.
c. Discovered that merchandise with an invoice amount of $7,400 purchased in (a) was defective and returned items, receiving credit.
Account Debit Credit
Inventory $7,400
Accounts Payable-Schell Co. $7,400
c. This transaction reduces Inventory and the Accounts Payable. Since this return was made after payment was made at the discounted price, the credit will be for the cost of returned goods less the discount.
d. Purchased $5,900 of merchandise from Schell Co. on account, terms n/30.
Account Debit Credit
Inventory $5,900
Accounts Payable-Schell Co. $5,900
d. A purchase increases Inventory and Accounts Payable.
e. Received a refund from Schell Co. for return in (c) less the purchase in (d).
Account Debit Credit
Accounts Payable-Schell Co. $1,500
Cash $1,500
e. Compare the amount owed in (d) with the amount credited to the buyer in (c). Cash refunded from the supplier will be for the difference between these two amounts.