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Purchase-Related Transactions

Illustrate the effects on the accounts and financial statements of the following related transactions of Bowen Inc. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.

a. Purchased $400,000 of merchandise from Swanson Co. on account, terms 1/10, n/30.

Statement of Cash Flows	Balance Sheet								Income Statement
	Assets			=	Liabilities	+	Stockholders' Equity
	Accounts PayableCashNo EffectNo Effect	+	Accounts ReceivableInventoryNo EffectInventory	=	Accounts PayableInventoryNo EffectAccounts Payable	+		Capital StockRetained EarningsNo EffectNo Effect
	fill in the blank 5		fill in the blank 6		fill in the blank 7			fill in the blank 8
Statement of Cash Flows								Income Statement
FinancingInvestingOperatingNo effectNo effect	fill in the blank 10							Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effectNo effect	fill in the blank 12
								Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effectNo effect	fill in the blank 14
								Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effectNo effect	fill in the blank 16

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

Statement of Cash Flows	Balance Sheet								Income Statement
	Assets			=	Liabilities	+	Stockholders' Equity
	Accounts ReceivableCashNo Effect	+	Accounts PayableInventoryNo Effect	=	Accounts PayableInventoryNo Effect	+		Capital StockRetained EarningsNo Effect
	fill in the blank 21		fill in the blank 22		fill in the blank 23			fill in the blank 24
Statement of Cash Flows								Income Statement
FinancingInvestingOperatingNo effect	fill in the blank 26							Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effect	fill in the blank 28
								Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effect	fill in the blank 30
								Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effect	fill in the blank 32

c. Discovered that $60,000 of the merchandise was defective and returned items, receiving credit.

Statement of Cash Flows	Balance Sheet								Income Statement
	Assets			=	Liabilities	+	Stockholders' Equity
	Accounts PayableCashNo Effect	+	InventorySuppliesNo Effect	=	Accounts PayableAccounts ReceivableNo Effect	+		Capital StockRetained EarningsNo Effect
	fill in the blank 37		fill in the blank 38		fill in the blank 39			fill in the blank 40
Statement of Cash Flows								Income Statement
FinancingInvestingOperatingNo effect	fill in the blank 42							Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effect	fill in the blank 44
								Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effect	fill in the blank 46
								Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effect	fill in the blank 48

d. Purchased $35,000 of merchandise from Swanson Co. on account, terms 1/10, n/30.

Statement of Cash Flows	Balance Sheet								Income Statement
	Assets			=	Liabilities	+	Stockholders' Equity
	Accounts ReceivableCashNo Effect	+	Accounts PayableInventoryNo Effect	=	Accounts PayableInventoryNo Effect	+		Capital StockRetained EarningsNo Effect
	fill in the blank 53		fill in the blank 54		fill in the blank 55			fill in the blank 56
Statement of Cash Flows								Income Statement
FinancingInvestingOperatingNo effect	fill in the blank 58							Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effect	fill in the blank 60
								Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effect	fill in the blank 62
								Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effect	fill in the blank 64

e. Received a check from Swanson Co. for the balance owed from the return in (c), after deducting for the purchase in (d).

Statement of Cash Flows	Balance Sheet								Income Statement
	Assets			=	Liabilities	+	Stockholders' Equity
	Accounts ReceivableCashNo Effect	+	InventorySuppliesNo Effect	=	Accounts PayableCashNo Effect	+		Capital StockRetained EarningsNo Effect
	fill in the blank 69		fill in the blank 70		fill in the blank 71			fill in the blank 72
Statement of Cash Flows								Income Statement
FinancingInvestingOperatingNo effect	fill in the blank 74							Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effect	fill in the blank 76
								Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effect	fill in the blank 78
								Cost of goods soldSalesSales discountsSales returns and allowancesNet incomeNo effect	fill in the blank 80

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a. A purchase increases the balance of Merchandise Inventory and Accounts Payable.

b. A payment of the invoice within the discount period reduces the balance of Accounts Payable for the amount of the invoice, reduces Cash for the amount of the invoice less the discount.

c. This transaction reduces Merchandise Inventory and Accounts Payable. This is because this return was made after payment at the discounted price.

d. A purchase increases Merchandise Inventory and Accounts Payable.

e. Compare the amount owed in (d) with the amount credited to the buyer in (c).