Question
Question 3 (14 marks) (a) Karns Company purchased merchandise on account from Bailey Office Suppliers for $87,000, with terms of 2/10, n/30. During the
Question 3 (14 marks) (a) Karns Company purchased merchandise on account from Bailey Office Suppliers for $87,000, with terms of 2/10, n/30. During the discount period, Karns returned some merchandise and paid $78,400 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 $73,000 with credit terms of ?/10, n/30. The cost of the merchandise sold was $43,070. During the discount period, Peter Company returned $3,000 of merchandise and paid its account in full (minus the discount) by remitting $68,600 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.
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