Question

This information relates to Wildhorse Co..

1. On April 5, purchased merchandise from Carla Vista Company for $28,200, terms 2/10, n/30.
2. On April 6, paid freight costs of $710 on merchandise purchased from Carla Vista.
3. On April 7, purchased equipment on account for $33,200.
4. On April 8, returned $3,800 of April 5 merchandise to Carla Vista Company.
5. On April 15, paid the amount due to Carla Vista Company in full.

a. Prepare the journal entries to record the transactions listed above on Wildhorse Co.’s books. Wildhorse Co. uses a perpetual inventory system.
b. Assume that Wildhorse Co. paid the balance due to Sandhill Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

Answer 1

Wildhorse Co.’s books

Perpetual Inventory System

Date Account Dr. Cr

5 April Merchandise Inventory $28,200

Accounts/ Notes Payable $28200

Purchased merchandise from Carla Vista Company for $28,200, terms 2/10, n/30.

6 April Freight Charges $ 710

Cash $ 710

Paid freight costs of $710

7 April Equipment $ 33200

Accounts Payable $ 33,200

Purchased equipment on account for $33,200.

8 April Accounts Payable $3800

Merchandise Inventory $ 3800

Returned $3,800 of April 5 merchandise

15 April Accounts Payable $ 24,400

Purchases Discount 488

Cash $ 23,912

Paid the amount due ($28,200- $3800= $24,400)

2% of $ 24,400= $ 488

b. Payment of balance due on May 4 instead of Apr 5

4 May Accounts Payable $ 24,400

Cash $ 24,400