Question

Exercise 5-20

This information relates to Rana Co.

1.		On April 5, purchased merchandise from Craig Company for $43,000, terms 2/10, net/30, FOB shipping point.
2.		On April 6, paid freight costs of $970 on merchandise purchased from Craig Company.
3.		On April 7, purchased equipment on account for $27,000.
4.		On April 8, returned some of April 5 merchandise, which cost $3,500, to Craig Company.
5.		On April 15, paid the amount due to Craig Company in full

A. Prepare the journal entries to record these transactions on the books of Rana Co. using a periodic inventory system.

B.  Assume that Rana Co. paid the balance due to Craig Company on May 4 instead of April 15. Prepare the journal entry to record this payment.

.

Answer 1

Date	Account titles and explanation	Debit	Credit
April 5	Merchandise Inventory	$ 43000
	Account payable- Craig company		$ 43000
	(To record merchandise purchased)
April 6	Merchandise Inventory	$ 970
	Cash		$ 970
	(To record freight paid)
April 7	Equipment	$ 27000
	Account payable		$ 27000
	(To record equipment purchased)
April 8	Account payable- Craig Company	$ 3500
	Merchandise Inventory		$ 3500
	(To record inventory return)
April 15	Account payable- Craig company (43000-3500)	$ 39500
	Cash		$ 38710
	Merchandise Inventory (43000-3500)*2%		$ 790
	(To record amount paid)

Assume that Rana Co. paid the balance due to Craig Company on May 4 instead of April 15. Prepare the journal entry to record this payment

Date	Account titles and explanation	Debit	Credit
May 4	Account payable (43000-3500)	$ 39500
	Cash		$ 39500
	(To record amount paid)