Question 6 (9 points)

Question 6 (9 points)

Alpha Company used the periodic inventory system for purchase & sales of merchandise. Discount terms for both purchase & sales are, FOB Destination, 2/10, n30 and the net method is used.

> Alpha Company purchased on account $2,600 of merchandise from Bravo Company on May 2, 2016.

> Alpha Company returned, to Bravo Company, $250 of this merchandise on May 3, 2016.

> Freight charges related to this transaction of $150 were paid by Bravo Company.

Use this information to prepare Alpha Company’s compound General Journal entry (without explanation) for the payment for merchandise on May 15. If no entry is required then write “No Entry Required.”


Expert Answer


Since the discount term is agreed for 2% if the payment is made within 10 days and since the payment is not made within 10 days, discount cannot be availed.
Total amount to be paid = $2600-$250 = $2350
Since the freight charges were paid by Bravo company, no entry will be made in the books of Alpha company.
The entry will be
Accounts payable $2600
Purchase returns $250
Cash $2350

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