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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)
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