16 October, 00:48

# Littleton Books has the following transactions during May. May 2 Purchases books on account from Readers Wholesale for \$4,200, terms 2/10, n/30. May 3 Pays cash for freight costs of \$290 on books purchased from Readers. May 5 Returns books with a cost of \$350 to Readers because part of the order is incorrect. May 10 Pays the full amount due to Readers. May 30 Sells all books purchased on May 2 (less those returned on May 5) for \$4,900 on account. Required: 1. Record the transactions of Littleton Books, assuming the company uses a periodic inventory system.

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1. 16 October, 02:23
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The journal entries are shown below:

On May 2:

Purchase A/c Dr \$4,200

To Accounts Payable A/c \$4,200

(Being purchase is made on credit)

On May 3:

Freight Inward A. c Dr \$290

To Cash A/c \$290

(Being freight expenses are paid in cash)

On May 5:

Accounts payable A/c Dr \$350

To Purchase return \$350

(Being purchase return is recorded)

On May 10:

Accounts payable A/c Dr \$3,850

To Cash A/c \$3,773

To Discount \$77

(Being full amount is paid and the remaining balance is credited to the cash account)

The discount is computed below:

= (Purchase - purchase return) * discount rate

= (\$4,200 - \$350) * 2%

= \$3,850 * 2%

= \$77

On May 30:

Accounts receivable A/c Dr \$4,900

To Sales revenue \$4,900

(Being sales is recorded)