Journalize entries for the following related transactions of Manville Heating & Air Company: a. Purchased $90,000 of merchandise from Wright Co. on account, terms 2/10, n/30.

Journalize entries for the following related transactions of Manville Heating & Air Company:

a. Purchased $90,000 of merchandise from Wright Co. on account, terms 2/10, n/30.

b. Paid the amount owed on the invoice within the discount period.

c. Discovered that $18,000 of the merchandise purchased in (a) was defective and returned items, receiving credit for $17,640 [$18,000 − ($18,000 × 2%)].

d. Purchased $10,000 of merchandise from Wright Co. on account, terms n/30.

e. Received a refund from Wright Co. for return in (c) less the purchase in (d). 

Answer:

a. Merchandise Inventory [$90,000 – ($90,000 × 2%)] 88,200

Accounts Payable—Wright Co.88,200

b. Accounts Payable—Wright Co.88,200

Cash88,200

c. Accounts Payable*—Wright Co. [$18,000 – ($18,000 × 2%)] 17,640

Merchandise Inventory17,640

d. Merchandise Inventory10,000

Accounts Payable—Wright Co.10,000

e. Cash7,640

Accounts Payable—Wright Co.7,640

* Note:  The debit of $17,640 to Accounts Payable in entry (c) is the amount of cash refund due  

from Wright Co. It is computed as the amount that was paid for the returned merchandise, 

$18,000, less the purchase discount of $360 ($18,000 × 2%). The credit to Accounts Payable 

of $10,000 in entry (d) reduces the debit balance in the account to $7,640, which is the amount 

of the cash refund in entry (e). The alternative entries below yield the same final results.

c. Accounts Receivable—Wright Co.17,640

Merchandise Inventory17,640

d. Merchandise Inventory10,000

Accounts Payable—Wright Co.10,000

e. Cash7,640

Accounts Payable—Wright Co.10,000

Accounts Receivable—Wright Co.17,640