On June 10, Purcey Company purchased $6,000 of merchandise from Guyer Company, terms 3/10, n/30. Purcey pays the freight costs of $430 on June 11. Goods totaling $700 are returned to Guyer for credit on June 12. On June 19, Purcey Company pays Guyer Company in full, less the purchase discount. Both companies use a perpetual inventory system.

On June 10, Purcey Company purchased $6,000 of mer
Part A. Prepare separate entries for each transaction on the books of Purcey Company

Part B. Prepare separate entries for each transaction for Guyer Company. The merchandise purchased by Purcey on June 10 cost Guyer $2,430, and the goods returned cost Guyer $260.

Part A. Entries in Purcey Company:

On June 10:

Debit Merchandise $6,000

Credit Accounts Payable $6,000

On June 11:

Debit Freight in $430

Credit Cash $430

On June 12:

Debit Accounts Payable $700

Credit Merchandise $700

On June 19:

Debit Accounts Payable $5,300

Credit Purchase discount $159

Credit Cash $5,141

Part B. Entries in Guyer Company:

On June 10:

Debit Account Receivable $6,000

Credit Sales $6,000

Debit Cost of goods sold $2,430

Credit Merchandise $2,430

On June 12:

Debit Sales $700

Credit Account Receivable $700

Debit Merchandise $260

Credit Cost of goods sold $260

On June 19:

Debit Cash $5,141

Debit Sales Discount $159

Credit Account Receivable $5,300

Explanation:

Credit terms of 3/10, n/30 means that 3% discount for the payment within 10 days and the full amount to be paid within 30 days.

Part A. Entries in Purcey Company:

On June 10:

Debit Merchandise $6,000

Credit Accounts Payable $6,000

On June 11:

Debit Freight in $430

Credit Cash $430

On June 12:

Debit Accounts Payable $700

Credit Merchandise $700

On June 19:

Purcey pays and takes the appropriate discount:

3% x ($6,000 - $700) = $159

Cash Guyer Company receives: $5,300-$159 = $5,141

The journal entry that Purcey make:

Debit Accounts Payable $5,300

Credit Purchase discount $159

Credit Cash $5,141

Part B. Entries in Guyer Company:

On June 10:

Debit Account Receivable $6,000

Credit Sales $6,000

Debit Cost of goods sold $2,430

Credit Merchandise $2,430

On June 12:

Debit Sales $700

Credit Account Receivable $700

Debit Merchandise $260

Credit Cost of goods sold $260

On June 19:

Debit Cash $5,141

Debit Sales Discount $159

Credit Account Receivable $5,300

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