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.

If 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. The journal entries for Littleton Books, assuming the company uses a periodic inventory system are:

Littleton Books journal entries

May 2  

Debit Inventory $4,200

Credit Accounts Payable  $4,200  

(To record purchase on account)

May 3  

Debit Freight Inward   $290

Credit Cash $290                      

(To record payment of freight cost)

May 5  

Debit Accounts payable $350

Credit Inventory $350

(To record purchase return )

May 10

Debit Accounts payable $3,850

($4,200-$350)

Credit Cash $3,773

[($4,200-$350)×98%]

Credit Inventory $77

[($4,200-$350)×2%]

(To record amount paid)                      

May 30

Debit Accounts receivable  $4,900

Credit Sales revenue            $4,900

(To record credit sales)

May 30

Debit  Cost of good sold $4,063

Credit Inventory $4,063

($4,200+$290-$350-$77)

(To record Inventory)

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Explanation:

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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