Cornerstone Exercise 6-20 Recording Purchase Transactions Mathis Company and Reece Company use the perpetual inventory system. The following transactions occurred during the month of April: a. On April 1, Mathis purchased merchandise on account from Reece with credit terms of 2/10, n/30. The selling price of the merchandise was $3,100, and the cost of the merchandise sold was $2,225. b. On April 1, Mathis paid freight charges of $250 cash to have the goods delivered to its warehouse. c. On April 8, Mathis returned $800 of the merchandise which had originally cost Reece $500. d. On April 10, Mathis paid Reece the balance due. Required: Prepare the journal entry to record the April 1 purchase of merchandise and payment of freight by Mathis. April 1 Inventory 3,100 Accounts Payable 3,100 (Purchased inventory on account) April 1 Inventory 250 Cash 250 (Recorded the payment of freight charges) Prepare the journal entry to record the April 8 return of merchandise. April 8 Accounts Payable 800 Inventory 800 (Returned merchandise) Feedback Check My Work Mathis is the buyer. From the buyer's perspective, the historical cost principle implies that inventory cost will include the purchase price of the inventory plus any cost of bringing the goods to a salable condition and location. Prepare the journal entry to record the April 10 payment to Reece. For a compound transaction, if an amount box does not require an entry, leave it blank. April 10 Accounts Payable 2,300 Cash 2,254 Inventory 46 (Paid accounts payable within discount period)