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22 January, 02:10

Journalize entries for the following related transactions of Lilly Heating & Air Company using the net method under a perpetual inventory system. (If an amount box does not require an entry, leave it blank.) a. Purchased $34,000 of merchandise from Schell Co. on account, terms 2/10, n/30. b. Paid the amount owed on the invoice. c. Discovered that merchandise with an invoice amount of $6,800 purchased in (a) was defective and returned items, receiving credit. d. Purchased $5,100 of merchandise from Schell Co. on account, terms n/30. e. Received a refund from Schell Co. for return in (c) less the purchase in (d).

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  1. 22 January, 03:12
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    Part a

    Merchandise $34,000 (debit)

    Trade Payable $34,000 (credit)

    Part b

    Trade Payable $34,000 (debit)

    Cash $34,000 (credit)

    Part c

    Refund Receivable $ 6,800 (debit)

    Merchandise $6,800 (credit)

    Part d

    Merchandise $5,100 (debit)

    Trade Payable $5,100 (credit)

    Part e

    Cash $1,700 (debit)

    Refund Receivable $1,700 (credit)

    Explanation:

    Part a

    Merchandise $34,000 (debit)

    Trade Payable $34,000 (credit)

    Recognise an Asset - Merchandise and a Liability - Trade Payable

    Part b

    Trade Payable $34,000 (debit)

    Cash $34,000 (credit)

    De-recognise the Liability - Trade Payable and De-recognise asset - Cash

    Part c

    Refund Receivable $ 6,800 (debit)

    Merchandise $6,800 (credit)

    Recognise an asset - Refund Receivable and de-recognise asset - Merchandise

    Part d

    Merchandise $5,100 (debit)

    Trade Payable $5,100 (credit)

    Recognise asset - Merchandise and recognise liability - Trade Payable

    Part e

    Cash $1,700 (debit)

    Refund Receivable$1,700 (credit)

    Recognise asset - Cash and de-recognise the asset - Refund Receivable
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