Recording Purchase Transactions

Mathis Company and Reece Company use the perpetual inventory system. The following transactions occurred during the month of April:

1. 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.
2. On April 1, Mathis paid freight charges of $250 cash to have the goods delivered to its warehouse.
3. On April 8, Mathis returned $800 of the merchandise which had originally cost Reece $500.
4. On April 10, Mathis paid Reece the balance due.

Required:

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Prepare the journal entry to record the April 1 purchase of merchandise and payment of freight by Mathis.

April 1	Accounts PayableAccounts ReceivableCashInventoryPurchasesInventory	Inventory
	Accounts PayableAccounts ReceivableCashInventoryPurchasesAccounts Payable		Accounts Payable
	(Purchased inventory on account)
April 1	Accounts PayableAccounts ReceivableCashInventoryTransportation-InInventory	Inventory
	Accounts PayableAccounts ReceivableCashInventoryTransportation-InCash		Cash
	(Recorded the payment of freight charges)

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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.

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Prepare the journal entry to record the April 8 return of merchandise.

April 8	Accounts PayableAccounts ReceivableCashCost of Goods SoldInventoryAccounts Payable	Accounts Payable
	Accounts PayableAccounts ReceivableCashCost of Goods SoldInventoryInventory		Inventory
	(Returned merchandise)

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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.

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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 PayableAccounts ReceivableCashInventoryPurchase DiscountsAccounts Payable	Accounts Payable	Accounts Payable
	Accounts PayableAccounts ReceivableCashCost of Goods SoldPurchasesCash	Cash	Cash
	Accounts PayableAccounts ReceivableInventoryPurchasesPurchase Returns and AllowancesInventory	Inventory	Inventory
	(Paid accounts payable within discount period)