Purchase-Related Transactions Showcase Co., a furniture wholesaler, sells merchandise to Balboa Co. on account, $254,500, terms n/30. The cost of the goods sold is $152,700. Showcase issues a credit memo for $30,000 for merchandise returned prior to Balboa paying the original invoice. The cost of the merchandise returned is $17,500. a. Journalize Balboa Co.'s entry for the purchase. b. Journalize Balboa Co.'s entry for the return of the merchandise for credit. c. Journalize Balboa Co.'s entry for the payment of the invoice.

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Business

Micah Cobb

12 July, 04:05

Purchase-Related Transactions Showcase Co., a furniture wholesaler, sells merchandise to Balboa Co. on account, $254,500, terms n/30. The cost of the goods sold is $152,700. Showcase issues a credit memo for $30,000 for merchandise returned prior to Balboa paying the original invoice. The cost of the merchandise returned is $17,500. a. Journalize Balboa Co.'s entry for the purchase. b. Journalize Balboa Co.'s entry for the return of the merchandise for credit. c. Journalize Balboa Co.'s entry for the payment of the invoice.

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Adyson Ryan · Answer 1

Assuming Balboa uses a perpetual inventory system:

a) Date uu, yy, merchandise purchased from Showcase Co. on terms n/30

Dr Merchandise inventory 254,500

Cr Accounts payable 254,500

b) Date xx, yy, return of defective (or incorrect) merchandise

Dr Accounts payable 30,000

Cr Merchandise inventory 30,000

c) Date zz, yy, payment of invoice

Dr Accounts payable 224,500

Cr Cash 224,500

Since Balboa is the buyer of the goods, the Showcase's COGS are not relevant to them. Also, since there was no discount for early payment, the payment was for 100% of the outstanding debt.