(a) Karns Company purchased merchandise on account from Bailey Office Suppliers for $174,000, with terms of 2/10, n/30. During the discount period, Karns returned some merchandise and paid $156,800 as payment in full. Karns uses a perpetual inventory system. Prepare the journal entries that Karns Company made to record:
(1) The purchase of merchandise.
(2) The return of merchandise.
(3) The payment on account.
(b) Hinds Company sold merchandise to Peter Company on account for $146,000 with credit terms of?/10, n/30. The cost of the merchandise sold was $86,140. During the discount period, Peter Company returned $6,000 of merchandise and paid its account in full (minus the discount) by remitting $137,200 in cash. Both companies use a perpetual inventory system.
Prepare the journal entries that Hinds Company made to record:
(1) The sale of merchandise.
(2) The return of merchandise.
(3) The collection on account.