Sunday, January 8, 2012

How do I journalize an entry with inventory and FOB?

The question is Mr. Round purchased 200 tires on account for $100/tire from Goodyear. Terms 1/10, n/30, FOB shipping point, $100 (all freight must be paid upfront with cash).|||Perpetual Inventory System


At the time of the purchase:


Dr Merchandise Inventory 20,100


Cr Accounts Payable 20,000


Cr Cash 100


Payment made within discount period


Dr Accounts Payable 20,000


Cr Cash 19,800


Cr Merchandise Inventory 200





Periodic Inventory System


At the time of the purchase:


Dr Purchases 20,000


Dr Freight-In 100


Cr Accounts Payable 20,000


Cr Cash 100


Payment made within discount period


Dr Accounts Payable 20,000


Cr Cash 19,800


Cr Purchases Discount 200

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